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Split direct deposit: a simple way to save more money

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If you need to boost your savings, consider putting things on autopilot by splitting part of your direct deposit from your paycheck into a high-yield savings account or an investment account.

With this strategy, a chunk of your paycheck goes into a checking account to pay bills and other expenses, while a portion you’re comfortable setting aside for an emergency fund can go in a high-yield savings account, where it’ll earn more interest and you’ll be less tempted to spend it.

Whether it’s a percentage of your paycheck or a set dollar amount each payday, having your money automatically moved into a high-yielding savings account allows you to beef up your savings — and chances are you won’t even miss it.

“Without even thinking about it, without lifting a finger, it’s being set aside,” says Jane Larimer, president and CEO at the National Automated Clearing House Association. “… It’s that easy. And I think sometimes people don’t think about — they think, well if I only have a few dollars, why do it? Well a few dollars adds up over time.”

How to set up a split deposit

First, find out if your employer offers split direct deposit by checking with your payroll department or signing into your account on your payroll provider’s website.

You may be able to divide your paycheck based on either a percentage or a dollar amount. This process may be called changing your bank elections, or it may be under the choice of adding or editing your accounts. Some employers may have a form that will need to be filled out. If your employer doesn’t yet provide a split-deposit option, consider asking for it.

“If their employer doesn’t offer it, encourage them to offer it,” Larimer says. “Sometimes they just need to hear from their employees first.”

If your employer doesn’t offer split deposit, you can effectively accomplish the same thing by setting up recurring transfers from checking to savings automatically at your bank. If you’re depositing the check, you also might be able to deposit most into checking and some into your savings account — if they are at the same bank. If they’re not, there may be a way to set up recurring transfers to your high-yield savings account.

If you have an existing savings account, that’s a great start – but be sure it’s earning a top yield. Otherwise your money isn’t working its hardest for you.

Most consumers need the extra savings

According to a recent Bankrate survey, about 4 in 10 U.S. adults would need to borrow money to cover a $1,000 emergency.

But the savings problem may be even worse. The Federal Reserve also released a study in May 2021 that found 36 percent of U.S. households couldn’t afford a $400 emergency. Larimer says a $20 split deposit each paycheck can make a big difference. Workers paid twice a month would accumulate $480 in a year — not including interest. That amount would put you on the right side of the Federal Reserve study.

Starting to save can be painfully slow at first, says Lauren Zangardi Haynes, CIMA, a certified financial planner at Spark Financial Advisors.

“Whether you’re investing or putting it into a savings account, in the beginning it feels like you’re not making any headway,” Zangardi Haynes says. “But then if you stick with it, consistently … once you look back at the end of the year, you’ll see that you’re no longer a part of that statistic of not being able to afford a $400 emergency.”

“Many people have a feeling that there’s just absolutely no room in their budget,” Zangardi Haynes says. “But what happens is that we’re actually surprisingly flexible in terms of many of our spending choices. … I don’t think people give themselves enough credit for their ability to adapt.”

Split deposit and your tax refund

Similar to your paycheck, you can have the IRS deposit your federal tax refund into several bank accounts, which makes it easier to put some of your refund into a savings account to start or build up an emergency fund. The IRS allows you to split up your deposited refund into as many as three accounts, at up to three different U.S. financial institutions.

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Written by
Matthew Goldberg
Consumer banking reporter
Matthew Goldberg is a consumer banking reporter at Bankrate. Matthew has been in financial services for more than a decade, in banking and insurance.
Edited by
Wealth editor