You can’t forget to save if you pay yourself first. With nearly three-quarters of Americans reporting having financial regrets, according to a recent Bankrate survey, many could benefit from a simple pay-yourself-first savings strategy.

Paying yourself first gives you the opportunity to save your money before paying your bills or anything else. This type of budgeting prioritizes saving up front rather than saving money that’s left over.

Here’s how paying yourself first can help if you’re struggling to save — or if you’re just looking to save more money.

Key takeaways

  • Paying yourself first means moving some money straight to your savings account each payday — before spending it on bills or anything else.
  • A pay-yourself-first strategy can be an effective way to save toward your emergency fund or other planned purchases.
  • When deciding to pay yourself first, it's important to create a budget to ensure you keep enough in your checking for bills and other living expenses.

What it means to pay yourself first

Paying yourself first generally implies that your money goes directly into a savings account – this way it’s more difficult to spend those funds.

“I think the automated payroll deduction or direct deposit certainly symbolizes the pay yourself mentality,” says Greg McBride, CFA, Bankrate chief financial analyst. “That’s probably not the only way it can be defined. But I think that’s the most practical way for most people.”

Usually a checking account should be used for spending money and paying expenses.

Paying yourself first is also important because it helps prevent you from becoming complacent when it comes to saving your money. What’s more, it can also help motivate you to make a budget to save.

“It also saves us from ourselves – that we’re not tempted to spend or overspend and undersave,” McBride says. “By saving first, you are putting a fence around what you can spend in a way.”

3 ways to pay yourself first

Putting your savings on autopilot is perhaps the easiest way to ensure you’re setting aside some money each month. This can be accomplished through split deposit, automated transfers or contributing to a 401(k) retirement plan.

1. Set up a split deposit.

One way to pay yourself first is to set up a split deposit, which is when a part of your paycheck goes into a savings account and the rest goes into a checking account.

If you want to set up a split direct deposit, first check if your employer offers this option. If they do, you’ll be asked to fill out a form, on which you’ll indicate how to divide your paycheck between your checking and savings accounts, based on either a percentage or dollar amount.

As an alternative to a split deposit, you could have your entire paycheck go into a high-yield savings account and then transfer what you need to pay bills and spend into your checking account.

2. Do automatic transfers.

Automatic transfers from your checking to your savings account could also achieve a similar result to split deposit, and many banks allow for such transfers. Consider setting up an automatic transfer that coincides with your payday. By using a budget, you can determine how much you’ll plan to transfer to savings every paycheck.

For instance, you could set up an automatic transfer of $100 each payday — and for those who are paid twice a month, that comes out to $2,400 per year in savings, plus interest.

3. Contribute to your retirement savings.

Another way to pay yourself first is by contributing a portion of your salary to a 401(k) plan. The way this retirement savings plan is structured is that your employer sends money from your paycheck directly to the account every time you get paid.

What’s more, many companies match employee 401(k) contributions up to a set percentage of your salary (often 4 or 5 percent).

Use multiple bank accounts to max out your savings

With top savings yields outpacing inflation, you’ll want to make sure your savings is either staying ahead of inflation or at least keeping up with it. The latter is the likely long-term goal.

These days, it’s quick and easy to transfer money between savings and checking accounts when they’re at the same bank. As such, you may decide to keep these accounts at separate banks, which makes transfers out of your savings account less convenient. When shopping around for the best savings account, look to online-only banks, which tend to offer the most competitive yields.

If you open a savings account at a new bank, it helps to do an initial test transfer of a small amount of money to your checking account at the other bank. This way, you’ll know how long a transfer takes in case of emergency.

Pros and cons of “pay yourself first” budgeting

When considering the strategy of paying yourself first, take into account the benefits and drawbacks.


The financial benefits of paying yourself first include:

  • It ensures you’ll save money: Whether you’re saving for emergencies or other planned purchases, transferring money to savings regularly is a surefire way to eventually reach your financial goals.
  • It helps you live within your means: When you don’t keep extra money in your checking account, you’ll likely find you’re more mindful of how you spend the money that’s in it.
  • It provides you with peace of mind: You’ll sleep better at night knowing you have money to cover unplanned expenses that come your way.


Potential downsides to paying yourself first include:

  • Transferring too much to savings: Not keeping enough money in your checking account can be harmful for your finances. Always keep a cushion in your checking account to avoid paying overdraft fees and possibly monthly service fees.
  • Contributing more than you can afford to your 401(k): Devoting too much of your paycheck to your retirement fund can also leave you with not enough funds for bills and living expenses.
  • Saving at the expense of paying off debt: While it’s important to have an emergency fund, it’s also important to pay down debt, especially when it’s high-interest debt.

The bottom line

Paying yourself first can help set you up for savings success. Start small and realistic with your savings goals, so that your savings remain intact and your balance grows over time. The habit of saving, and the mindset that your savings account is for accumulating money (rather than spending it) can make a big difference in how much you’re able to save.

– Bankrate’s Karen Bennett provided updates to this article.