Many employers now offer direct deposit as a payroll option. Although you may choose to have your paychecks deposited into your checking account, it may also be possible to have part of your paychecks deposited into a savings account. This could help you achieve your savings goals or build an emergency fund for unexpected expenses.
How Does Direct Deposit Work?
If you are set up for direct deposit with your employer, you will no longer receive paper checks. Instead, your money is deposited electronically into your bank account. You may still receive a paper “paycheck stub” in the mail, or you may be given the option to access your paycheck information online.
Getting set up for direct deposit is very easy. You simply fill out a form that your employer provides with information about your bank or credit union and your checking and savings accounts.
Your employer may allow you to direct deposit a portion of your paycheck into a savings account each pay period. If this option is offered, you will need to designate how much will go into your checking account versus your savings accounts when you submit your direct deposit form. If you need to change the amounts in the future, you will have to submit a new direct deposit form.
Why Consider Direct Deposit?
There are several important reasons to consider direct deposit. It could save you time, money, and help you achieve your savings goals.
If you receive a paper check from your employer, you’ll have to take the time to drive to your bank or credit union to deposit it. With direct deposit, your money is deposited automatically. You don’t even have to think about it. Direct deposit allows you to spend your valuable time doing other things.
Helps You Save Money
It can be easy to get sidetracked on your savings goals when you have to remember to deposit money in your savings account. With direct deposit, however, the savings happen automatically. This can help you save for a new vehicle, a down payment for a home, or build an emergency fund.
Safer Than Paper Checks
If you receive a paper check, there’s always the possibility that it could be lost. If it’s mailed, it could accidentally be delivered to the wrong address. Someone could also steal your check and forge your signature.
Direct deposit eliminates all of these problems. There is no paper check to get lost or stolen because your money is sent electronically to your bank account.
Several things can slow down the depositing of a paper check. If a check is mailed, it could take several days for you to receive it. You could also get busy doing things and forget to make the deposit.
Direct deposit quickly deposits your money into your account on the scheduled payday. You’ll also have quick access to it, which could come in handy if you need to buy something or pay bills.
You May Have Certain Fees Waived
Some banks and credit unions may waive certain fees—like a monthly account maintenance fee—for their direct deposit customers. This is because direct deposit saves them time and resources since they don’t have to process your paychecks manually.
Helps With Budgeting
Creating and using a budget is a great way to make sure you have enough money to cover all of your monthly expenses. Because money is deposited directly into your account, direct deposit can help you stick to your budget. It helps you stay on schedule because you won’t have to worry about delays in receiving and depositing your paychecks.
Employers that offer direct deposit typically don’t charge their employees for the service. Many companies prefer to process payroll through direct deposit because it saves them time and money. After all, they don’t have to manually process and mail checks.
Receive Payment When You Are Unable to Visit a Bank
If you’re sick and you receive a paper check, you may have to wait until you’re feeling better before you can deposit it. This could cause budgeting problems or prevent you from paying your bills on time. With direct deposit, your money is deposited into your account without you having to do anything.
Direct deposit is also ideal for when you’re traveling. If you want to take a vacation, your money will be deposited while you are away.
Setting Up Direct Deposit
Setting up direct deposit so that part of your earnings are deposited into a savings account is usually simple and easy. Although the process may vary depending on the company, the following steps are typical.
1. Obtain a Direct Deposit Form
If your employer offers direct deposit, obtain a direct deposit form from someone in the payroll department. But, some employers may require you to fill out the form online.
2. Fill Out the Form
Enter all required information on the form. Information you’ll need may include your bank’s name, address, as well as your account information. You may also need a voided check.
3. Determine the Deposit Amount for Savings
If you want a certain percentage of your income to go into your checking account and the rest into a savings account, you’ll have to include the information on the form. To save time, figure out that allocation before you start filling out the form.
4. Submit the Form
After filling out the direct deposit form with all required information, return it to the person who gave it to you. It may take 1-2 weeks for direct deposit to take effect.
Opening a Savings Account
If you currently don’t have a savings account, opening one is quick and easy. It can be done in just a few minutes at a branch location, which means you can start growing your savings right away.
One of the best things about opening a savings account is that it may not affect your credit score. Click on the following link to learn more about opening a savings account and whether a credit check will be needed.