Military Saves Week: Five ways to automatically build savings

Saving is a key aspect of becoming more financially secure. Having cash reserves for an emergency, a vacation or a life event such as transitioning from the military builds confidence that we’re more ready for what life throws our way.

Yet we can all probably be more disciplined savers. One way to shore up your savings strategy is to take full advantage of all available tools that make this process automatic.

To kick off Military Saves Week (April 24-28), here are five ways to “set it and forget it,” build wealth automatically and meet your financial goals:

1. Start and contribute automatically to a savings account. If you have a checking and/or savings account with a bank or credit union, that’s great. If you have your paycheck directly deposited in a checking account, you can automatically transfer a small amount after each pay period from your checking to your savings account. It’s OK to start with a small amount: You don’t want to set aside too much just to have to move it back into your checking account before your next payday. Set the date of the automatic transfer for after your paycheck clears. Boost your savings even more by having some or all of your tax returns, bonuses and other cash advances directly deposited into your bank account.

Be sure to deposit funds into federally insured banks and credit unions (learn more about FDIC and NCUA insurance here: https://rly.pt/3ohgdpm

Details: https://rly.pt/3okE1ZD

2. Set aside savings in a higher yield bank account. Next, take advantage of perhaps the only positive aspect of inflation: the ability to earn higher interest on savings. Move your money to a performance savings or money market account with an annual percentage yield (many are now at or above 4%). You may be able to open such an account with no minimum balance, but banks sometimes require a minimum amount (often $2,500) to set up a no-fee, high-yield account.

The dividend is worth it. For example, say you start with $2,500 and save $100 per month in an account yielding 4%. In year one, you earn an extra $121 in interest; in year two, an extra $296; and in year three, an extra $526. (Calculate savings online at https://rly.pt/3MOGPbr

The more you save, the more you earn, and these funds can typically be withdrawn at no penalty when they are needed.

One downside with these accounts is the interest rate fluctuates. If you’re willing to give up access to your savings for a certain period of time, you can often lock in a higher interest rate with a certificate of deposit.

Details: Find a reputable institution with experience serving the military and Veterans at https://rly.pt/AmbahqBanks

3. Get banked and benefits directly deposited. If you’re a Veteran without a bank account, explore automatic ways to save with the Veterans Benefits Banking Program (VBBP). This program — created in 2019 by the U.S. Department of Veterans Affairs (VA) and my employer, the Association of Military Banks of America (AMBA) — ensures that Veterans and military families can find low-cost banking options. These banks allow you get your Veterans’ benefits directly deposited each month, which is a tool to make saving more automatic.

Details: https://rly.pt/3KUySRf

4. Pay down debt on a regular schedule. Debt reduction is a form of savings — the less debt you have, the less you pay in interest to carry that debt. That’s more money in your pocket.

There are two great ways to tackle debt: Pay off the highest interest rate debt first or pay off the smallest debts first and apply the extra funds toward other accounts (the “snowball” method).

Whatever your approach, use tools to calculate how much you need to pay each month to resolve the debt based on the interest rate (noting any interest rates increases). Set up autopayments that are above the minimum-only monthly payment.

If you have a fixed-rate home loan, you can pay extra principal each month, knock years off your loan and save thousands of dollars in interest payments.

Details: Learn more about paying down debts at https://rly.pt/reducedebt and check out this great tool PowerPay to help you pay down on debt at https://rly.pt/3L76uuA

5. Maximize retirement funding. Whether you’re employed by the military, government or a civilian firm, chances are you have the option of automatically contributing to an employer-sponsored retirement account. These funds are invested in the financial market, offer tax benefits and are primarily withdrawn in retirement. For instance, active-duty military and federal government employees who entered federal service during certain years may be automatically enrolled in the Thrift Savings Plan (TSP), a 401(k)-like retirement account. As with other employer retirement plans, the government may match TSP contributions for those who qualify. (Read more at https://rly.pt/4097cMo and https://rly.pt/40hzww5

With retirement planning, use automated reminders and online account tools to:

• Contribute an appropriate amount each pay period toward your retirement account.
• Check that you’re taking full advantage of any employer matching funds.
• Understand the tax implications of different types of investment funds.
• Periodically review your investment strategy.

And remember: If you don’t have access to an employer-sponsored retirement account, you can still open a traditional or Roth individual retirement account (IRA) and contribute automatically. Couples can put money in a Spousal IRA for a spouse who is not working.

Details: Explore IRA options at https://rly.pt/41QTRK3
Learn more

• Are you ready to commit to saving more for your financial future? If so, take the Military Saves pledge at https://rly.pt/MilitarySaves , where you can also find more financial tools and resources.

• Calculate other ways to save using the free tools at https://rly.pt/3UOPT23

• Get the Armed Forces Financial Guide at https://rly.pt/3MPI3TV

• Read my other tips for making the most of your money at https://rly.pt/41pv0wy