Take advantage of technology to make building your savings and investing it a seamless – and pain-free – process.

By Shane Cummings, CFP®AIF®, Wealth Advisor & Director of Technology/Cybersecurity as featured in Kiplinger 

Finding it a challenge to set aside savings on a consistent basis? Or maybe you just want to simplify how you save for the future. Whatever your goals, today’s digital tools make it easy to create and automate a personal savings program.

Automation can make a big difference in helping you build and grow your nest egg. Just like contributing to a company retirement plan, setting up a savings plan and sticking to it will reward you in the long run.

Here’s how to make it happen:

  1. Establish your objectives

The first step is to establish what you’re saving for and how much you’ll need. It’s much easier to put a plan into place that you can quantify. Do you want to save for a purchase or a vacation? Maybe you want to create an emergency fund. Set a target dollar amount and a timeframe to achieve this goal (or multiple goals). If you have any high-interest debt, consider whether extra savings should be allocated toward paying that off before putting those funds into your bank or investment accounts.

  1. Create a designated savings account

To get started with a plan, make sure you have an account set aside to put your savings into. If you only have a checking account at a bank, it’s a great idea to establish a separate account for your savings plan — that way it’s easier to track your progress. Utilizing mobile apps like Mint will help track your savings if you keep your accounts separate. Before opening an account, make sure your bank isn’t going to charge unreasonable fees.

If you don’t mind moving funds between banks, many online banks offer savings accounts with zero fees and very competitive interest rates. Websites like Kiplinger, with its The Best Bank for You, 2020 package, and NerdWallet are great resources for locating the banks that offer the best rates. Online programs through banks ,such as Marcus or Capital One, typically offer much higher rates on savings account rates than brick-and-mortar bank,s such as Wells Fargo or Bank of America, for example.

  1. Automate your savings with a monthly transfer

Once you’ve established your savings account, the simplest way to automate savings is to set up a recurring monthly transfer from your checking account into this targeted savings account. For example, you could transfer $100 on the 6th of every month from checking to savings. It typically helps to set the transfer date to occur soon after you get paid: That way the savings comes out right away, and you won’t be tempted to spend it.

Some banks also have programs to help you transfer small amounts to savings automatically — Bank of America’s “Keep the Change” program is a good example. Every time you make a debit card transaction, they’ll round the purchase amount up to the nearest dollar and transfer that to your savings account automatically. This may not seem like much, but if you use your debit card frequently, it will start to add up to some decent incremental savings over time on top of your other scheduled savings.

  1. Set a dollar amount that’s not too intimidating

Be sure to set the dollar amount at a level you think you can reasonably maintain. If you’re not sure, set your monthly contribution at a lower amount and then increase it as you get comfortable, working this into your monthly budget. Likewise, if you’re contributing to a company retirement plan, set up your salary deferral contributions and stick with them, and plan to gradually increase them over time. For example, you could increase it by 1% each calendar year until you hit the maximum.

  1. Use technology to track your saving – and spending

Now that you’ve started the saving program, the next step is to keep track. There are many budgeting/investing apps out there. Mint is one of the most well known and is free to use. As Mint is supported by product advertising, it identifies banks or programs that can boost your interest rates. Mint’s mobile application is also particularly useful, enabling you to aggregate all your financial accounts into one place to view all your balances and assets.

Mint will automatically assign categories to your spending (i.e., Fast Food, Doctor, Home Supplies) so that you can begin to see your spending by type and gain some intelligence from it. Many credit card companies also provide similar information on year-end credit card reports, so be sure to set aside some time each month to review the categories assigned. The systems aren’t perfect: You may occasionally need to move transactions to the right categories.

Using these apps may help you quickly identify some patterns you weren’t aware of. Like pre-pandemic, maybe you were spending a lot more on eating out than you realized, or how much your car is costing when you factor in gas, insurance and miscellaneous costs. When the app is done comparing your income to expenses, hopefully you’ll have an excess of income over expenses. If not, the tools will at least give you a place to start when considering where to modify your spending.

  1. Start investing those savings

If you’ve already built up your emergency or goal fund and are ready to start shifting additional savings toward longer-term goals, you should consider some market investment options. It’s never been easier to start an investing account. Major brokerage firms have mostly eliminated trading commissions and account fees, so you can avoid getting nickel and dimed to start an investing program.

You can also take advantage of fractional share investing. This basically means you can still invest in companies if your initial investment is lower than the cost of one company share. Do you like tech but can’t buy a share of a stock worth hundreds? Fractional share investing allows you to buy a fraction of a stock — so you can still invest $50 or $100 in your tech company of choice.

Likewise, you can spread your exposure and buy fractions of a basket of different stocks. Many brokerage firms have highly functional mobile apps that enable you to log in and trade on your smartphone or tablet. And, similar to programming your bank savings, brokerage platforms allow you to set up monthly recurring additions to your investments, so you can put these on autopilot as well.

Ultimately, saving is a critical tool for investing in your future. No matter what you’re saving for, whether it’s college, retirement or anything in between, using technology and automating key processes can help ensure that you reach your goals and keep your financial promises. And the earlier you start, the more compounding — earning interest, dividends and capital gains and reinvesting these assets  — can help your savings keep growing over time.

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