Living paycheck-to-paycheck is a reality for many. But saving for unexpected expenses is incredibly important. Savings accounts are a great tool to build a financial safety net. Above all, they are a liquid place to store money while earning interest.
That said, you must learn how to transfer money from checking to savings in a way that boosts your overall financial situation. We’ll help you figure things out. This guide explains simple steps to shift money into your savings account:
Things to Consider Before Transferring Money
First things first, there are a couple of things you should verify and confirm.
Start by double-checking the account number and routing number to prevent transfers to the wrong account, which can be difficult to reverse. Next, check if your bank imposes daily or per-transaction limits. The transaction must not put your checking account below any minimum balance. This is necessary to avoid fees.
Lastly, confirm the interest rate or annual percentage yield (APY) the account provider is offering. The APY is the measure of how beneficial a savings account can be. Some reputable providers, like SoFi, offer APY as high as 4%.
Step 1: Review Your Budget
Once you’ve confirmed the basics, determine the exact amount to transfer to a savings account. Take a closer look at your monthly income and review your budget — how much can you realistically afford to put in a savings account?
Remember that a savings account should only be touched in case of emergencies, so carefully identify disposable income. Even if it’s a little, plan to save money every month. Don’t forget to consider any upcoming expenses before moving the funds.
Step 2: Choose Between Internal or External Savings Accounts
Next, choose between an internal savings account within your current bank or an external savings account at a different financial institution.
Internal transfers are generally faster and more convenient since the money never leaves your primary bank. Automating transfer is also easier (more on this later).
Choose an external account if the secondary provider is offering a better interest rate.
Step 3: Set Up Automatic Transfers
Automating transfers will make your life so much easier. You can schedule a transfer from your checking to your savings account to occur immediately after your payday. Save money without the hassle of sending money yourself each month.
Pro tip? Set up direct salary deposits to your checking and savings accounts. Fill out the direct deposit authorization form and provide all the necessary documents to your employer. Then, ask the payroll department to split your paycheck into two accounts: checking and savings.
Step 4: Make Manual Transfers
Make manual transfers whenever you receive unexpected money. This could be a work bonus, tax refund, or cash gift. Immediately transfer it to your savings account to build a strong financial foundation.
Lastly, audit your checking account at the end of each month. Transfer any remaining, unspent money to your savings account.
And that’s all! You can shift money into your savings account and start planning for the future.
