If you're a fan of direct deposit, you know how much time it saves you: there's no running to your financial institution with a paper check in hand, hoping you'll get there to cash it before closing. You don't have to wait around for your check to clear before you pay your bills. And you'll never spend time worrying if your check got lost in the mail, or worse, stolen.
Direct deposit is dependable and simply makes life easier. But did you know direct deposit can also help you build wealth? Here's how:
1. Have your payroll check or government benefits deposited into your savings account
The vast majority of people set up direct deposits to flow into their checking accounts, which is fine...until they notice they spend every dollar in their checking account while never saving a penny. So a little trick is to have the check deposited into a savings account, and then move the money to a checking account to cover spending.
This strategy can be helpful if you struggle with saving money. For some people, it can be easier psychologically to "take" money they want to spend versus move money they would like to save. This trick works best if you follow a budget and have a good grasp on your expenses each month.
If you receive Social Security, VA, or other federal benefits, you can sign up for direct deposit here.
2. Have your payroll check split and deposited into two (or more) accounts
News flash: many companies will let you set up direct deposit to more than one account. This came as a pleasant surprise when a human resources manager mentioned this to me in passing.
Immediately, my brain was swarming with savings opportunities: the bulk of my check could go into checking, but I could also arrange to have a set amount deposited to my savings account, and yet another amount to a brokerage account. You could arrange to have a direct deposit made into a child's 529 college savings plan or an individual retirement account (IRA) if you do not participate in a 401(k) plan.
This strategy works well if your expenses are dependable from month to month; it can be a hassle for both you and your payroll department to keep making adjustments.
You may have to fill out a direct deposit form with your financial services firm, as well as a form with your payroll department.
3. Have tax refunds, dividend checks, and other kinds of income deposited into interest-bearing accounts
Direct deposit isn't just for payroll checks.
Expecting a tax refund? The IRS will ask you when you file how you would like to be paid: by check or by direct deposit. Get regular quarterly dividends from stock investments? They can also be direct deposited. Ditto other payments, such as royalties and insurance payouts.
Treat these "windfalls" as savings opportunities instead of extra spending money by having them deposited directly into an interest-bearing account. You'll be surprised how fast these types of payments add up when you don't spend them.
And as a bonus, they'll be earning more money for you during the year, helping you build a better financial future.
You can get your paycheck up to two days early with Direct Deposit and Payday Perqs! Signing up is easy.