Set Up a New Savings Account and Begin to Pay Yourself First

Written by , September 10, 2014

Set Up a New Savings Account and Begin to Pay Yourself FirstPaying yourself first is one of the most powerful and underappreciated techniques for strengthening your personal financial situation. When you “pay yourself first” you treat your savings goal as another bill that must be paid each month, along with your mortgage or rent, your utilities, your car payment, etc.

The reason for approaching savings in this manner is because that it helps overcome the temptation to make your savings an afterthought which, unfortunately, happens far too often. If you’re not currently following this strategy, or you’re finding it difficult to make it work, then you may want to consider setting up a new savings account to make the process easier.

Here’s some banking advice on how setting up a new account can help you pay yourself first.

  • It’s Easier to Track With a Separate Account. Sometimes an individual will try to build up their savings within another account they already have. Most often this is their existing checking account. One problem with this method is that it can be difficult to track exactly what parts of your co-mingled accounts represent your savings.
    • It’s possible to track with a separate record-keeping system, such as a notebook or spreadsheet on your computer, but that won’t help much when you’re checking your account balance at an ATM, trying to figure out how much you can withdraw without tapping into savings. Having a separate savings account makes this a non-issue.
  • It Works Well With Direct Deposit. Assuming you use direct deposit, you can specify that a certain portion of each pay check go into your new account. This means that you don’t have to worry about remembering to manually transfer the target amounts from one account to another each month. Using direct deposit is one of the best ways to implement the “pay yourself first” strategy, and setting up a new savings account to take advantage of direct deposit is especially powerful.
  • It’s Easier to Avoid Temptation With a Separate Account. One key to successful saving is being able to keep your savings intact over the long term. In other words, you need to be able to resist the temptation to spend your savings on things other than your ultimate savings goal. For example, if you’re trying to save up money for a down payment on your first home, you might set a $30,000 savings goal. If that money is in a separate account, it will be easier to reach your goal than if the funds were commingled in your day-to-day checking account that you regularly make withdrawals from.
  • You Can Limit Access to a New Account. By setting up a new account you can make it harder for yourself to tap into your savings for impulse purchases that are related to your savings goal. Decline an ATM card, and don’t link your new savings account to your checking account. When it’s a little harder to get your funds, you’re less likely to spend on other things.
  • Paying yourself first is such an important financial strategy that you may wish to set up an entirely new savings account in order to implement the strategy.

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