The short-term emergency fund—a safety net
Many experts recommend you keep 6 months of living expenses in a separate savings account to protect your family in case of a medical emergency or job loss. To get started, deposit a fixed amount, such as $100, from your paycheck to a savings account via direct deposit. Or simply transfer the money from your checking account into a regular savings account or money market savings account after each pay period. You want your emergency savings to be accessible quickly in an emergency, but not so accessible that you'll borrow from it for everyday expenses. It helps to keep this account separate from other savings, and to think of it not as a cushion or investment, but as a break-glass-in-event-of-emergency fund.
Long-term savings—preparing for your future
These accounts are for big goals down the road, such as your retirement or your children's college education. Those goals may seem far off, but the earlier you start, the more time you will have for your money to grow.
- Retirement: Once again, it's best to save automatically. You can deposit to a bank IRA or, if your employer offers a 401(k), you can usually arrange to have automatic deductions made from your pre-tax pay and directly deposited into the plan. There are lots of great ways to start investing in retirement no matter where you are in life, so don't wait.
- College: For many parents, sending their children to college is one of the most important lifetime goals. Use the cost projector at FinAid.org to estimate how much your child will need, then look into college savings plans that allow you to have automatic deposits deducted from your checking account.
How to transfer funds automatically— and easily
Whether your goal is to build up short-term or long-term savings, an automatic savings transfer can make it easier to get started. You determine the amount to be transferred and how often you want the transfer to take place—even the exact day of the transfer. Because you're in control, you can make adjustments to your transfers or stop them whenever you like. The good news: Your money adds up. Transfer just $15 per week, and in only 5 years you'll have $3,900—and that's before any interest is added.
If you're a Bank of America customer, you can set up your automatic savings transfer in 4 easy steps:
- Sign in to Online Banking and select the Transfers tab
- In the dropdown menus, select From your checking account and To your savings account
- Enter the Amount you want to transfer and select a Frequency
- Choose the Duration you'd prefer and click Schedule Transfer
Get started setting up an automatic savings transfer.
If you'd prefer, you can set up an automatic savings transfer by calling customer service or in person at a banking center near you. Find a banking center.
Don't have a checking account? Sign up for a checking account now.