An important part of taking control of your financial health is recognizing the value of certain types of automatic payments and money transfers. For example, when you set up your checking account to automatically transfer a specific sum into your savings account each month, this “forced” savings habit keeps you progressing towards your goals.
A foundation for these automatic transfers is direct deposit. With direct deposit, rather than receive a paper paycheck from your employer every pay period, your salary or wages are automatically transferred into whatever checking or savings accounts you specify. Setting up direct deposit is a straightforward process, and takes very little time.
Here’s some banking advice on setting up a direct deposit.
First confirm that your employer offers direct deposit. Most employers enjoy the convenience of direct deposit because it frees them from the burden of having to print out and sign paper checks each pay period. If you work in a large company, go to your human resources department to inquire about direct deposit. If you work for a small company, ask your immediate supervisor.
If your employer offers direct deposit, they’ll likely give you a direct deposit form. These forms may differ slightly, but in general you’ll need to provide a few pieces of financial information, including which of your account or accounts you want your paycheck to be deposited into. Many people choose to deposit most or all of their paycheck into their checking account, because that account is the account from which they manage their day-to-day financial activities.
If possible, you may want to consider allocating your direct deposit into two accounts; a checking account will receive most of your pay, and a savings account (or even an investment brokerage account) will get the remaining amount. This can be a great way for you to stick to your savings plan.
Whatever accounts you decide, you’ll need to provide your ABA number (also known as a routing number) for each account. You’ll also need to provide the individual account number. If you’re signing up for direct deposit with a checking account, both the ABA number and your account number are printed at the bottom of your check. The ABA number is the nine digit number that is printed first, separated by a small rectangle and two small squares.
Allow adequate time for your direct deposit instructions to take effect. Depending on when you submit the form, the frequency with which your employer pays its employees and the financial institution that your employer uses, it might take up to one or two pay periods before your direct deposit goes into effect. Make sure to take this time gap into account.
In addition to make it easier for you to save, using direct deposit will save you time and money. Rather than having to go to the bank each time you get paid, and wait in line to deposit your check, the funds are available to you immediately. There is no risk of losing your check, nor is there any danger of cashing your check and spending too much on impulse buys.
Tags: Banking Advice, Checking, direct deposit
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on Wednesday, November 30th, 2011 at 10:47 am and is filed under Checking.
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An important part of taking control of your financial health is recognizing the value of certain types of automatic payments and money transfers. For example, when you set up your checking account to automatically transfer a specific sum into your savings account each month, this “forced” savings habit keeps you progressing towards your goals.
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