Automatic savings account options and apps

Find out how you can grow your savings while you spend.

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Automated savings tools can help you save more money and build a bigger bank balance. But which tool is best for you will depend on your situation.

How does automatic savings work?

Automatic savings tools round up your daily transactions to the nearest dollar and send the change directly to your savings account. For example, if you used your debit card to buy breakfast at a café for $17.20, it would round up to an even $18.00 and send the extra $0.80 to your savings account. Or, if you elect to have your transactions rounded up to the nearest $5.00 amount, it would round the purchase up to $20.00 and put the extra $2.80 into your savings.

It might seem like a small amount, but if you make several purchases a day this could add up to a lot of money over the course of a few months or a year. Plus, if the extra change from your transactions are being added to a high-interest savings account, you’ll also earn interest on that money.

Automatic savings programs

One of the most common ways to save on what you spend is to enroll in a program through your bank that lets you round up money from your chequing account and automatically transfer it to your savings account.

Scotiabank has offered a round up program called Bank the Rest. If you opt in to Bank the Rest, you can preset whether you want to round up your debit purchases to the nearest $1.00 or $5.00. The difference is automatically transferred to your savings.

TD Canada Trust has offered a similar program, Simply Save, where you choose an amount between $0.50 and $5.00 that will be automatically transferred to your savings with every debit transaction or ATM withdrawal.

Check with your bank to see what savings program it currently offers.

Automatic savings apps

You can also use similar tools to round up your daily transactions and add the loose change to a student loan or an investment portfolio. For example, Mylo rounds up your purchases to the nearest $1 and automatically invests the difference. Wealthsimple is a robo-advisor that offers a similar option, which invests spare change through its Roundup program.

There are also apps that help you save money on everything from bills to groceries and even gas so that you have more to save each month. For example, Gas buddy helps you find the lowest gas prices near you anywhere in Canada.

Don’t have a savings account yet? Compare online savings account options:

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EQ Bank Savings Plus Account
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0.20%
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How else can I automate my savings?

There are several ways to set up transfers:

  • Split your paycheck. Ask your employer if it offers the ability to split your paycheck and send a portion to your savings account and a portion to your chequing account. If your paycheck fluctuates, ask if it can be split by percentages, like 15% to savings and 85% to chequing.
  • Schedule transfers to a savings account. It’s quick and easy to set up a regular direct debit from your chequing account to a linked savings account. You can specify that you want the funds to be automatically transferred to your savings account with the same frequency you receive your salary, such as weekly, biweekly or monthly. A portion of each paycheck will then be sent straight to your savings account, where it can earn a higher rate of interest.
  • Schedule transfers to a retirement account. In some cases this will work just like a scheduled transfer to a savings account. But if you have retirement options through your employer, you can have the funds taken out before you even get your paycheck.
  • Use a sweep account. Sweep is a program currently offered by Meridian Credit Union. Sweep automates transfers to and from a linked Meridian savings account. All you have to do is set a minimum and maximum limit for your Meridian chequing account balance, and your bank will automatically move money between the two accounts while making sure your balance stays within the limits you set. Just make sure to set a realistic minimum limit for your chequing account balance to make sure you can cover any urgent expenses that may arise.

What are the benefits of automated savings?

There are several reasons why it’s worthwhile setting up an automated savings plan:

  • It’s quick and easy to do. It only takes 5–10 minutes to set up everything required to automate your savings.
  • It’s convenient. Automating the process takes the work out of saving. When funds are automatically deposited into your savings account, you don’t have to remember to manually transfer savings funds every time you get paid.
  • It takes matters out of your hands. Automating your savings means you don’t have to rely on your own financial discipline to ensure your nest egg keeps growing.
  • You put yourself first. When most people get paid they pay their creditors first — rent to the landlord, bills to utility companies, debt payments to credit card providers. Automating your savings means you pay yourself before you pay anyone else, allowing you to prioritize your financial future above all else.
  • Your balance grows all the time. Your savings balance will grow steadily, and the power of compound interest could also kick in to provide an even bigger boost.
  • You can achieve your financial goals. As your savings balance builds without you having to lift a finger, you can reach your financial goals by putting in minimal effort.

Deciding how much to save

The first step when developing an automated savings plan is to work out what your savings goals are and what method of automated savings will work best for you.

If you tend to figure out how much you can spend based on how much is in your account, using a tool that rounds up your purchases can be a good way to help you save without feeling like the plan is too stringent.

If you’re the sort of person that sets and sticks to a budget, you may be better off budgeting out exactly how much you want to save each month and having it automatically transferred to your savings account.

If you’re not sure what you style is, try out both methods. You can choose your favorite later on — or continue using multiple tools to save more.

Example: Michelle’s savings plan

Michelle wants to start saving, and she decides to work it into her monthly budget and schedule weekly transfers from her chequing to her savings account, which earns 2.75% APR.

She figures out how much she’ll save if she puts away $10, $20, $50 or $100 each week to see how much of a difference compound interest makes. After comparing all of her options, Michelle puts together a new budget that lets her set aside $50 each week, which is enough to save up without affecting as much of her day-to-day life as saving more would.

$10 weekly deposit$20 weekly deposit$50 weekly deposit$100 weekly deposit
Interest rate2.75% APR2.75% APR2.75% APR2.75% APR
Account balance after 1 year$527$1,054$2,635$5,271
Account balance after 3 years $1,626$3,251$8,129$16,257
Account balance after 5 years$2,786$5,573$13,932$27,864

What else can I do to maximize my savings?

Once you’ve automated your savings, there’s plenty more you can do to build a bigger bank balance:

  • Make extra deposits. Even though you have an automated plan in place to take care of your savings, don’t be afraid to make additional contributions to your savings account when you come into some extra cash. For example, if you get a substantial tax refund, deposit some of those funds into your savings account before spending anything.
  • Review your deposit amount. Your financial circumstances change all the time, so it’s a good idea to review how much you’re automatically transferring to your savings account a couple times a year.
  • Review your account. While the savings account you chose six months ago might have offered the best interest rate available at the time, a lot can change in half a year. There might be another bank offering a much better savings deal, so compare your options regularly and shop around for the highest interest rate you can find.
  • Avoid account fees. Paying unnecessary fees can quickly eat into your savings. Look for a savings account that doesn’t charge any fees, and make sure any linked chequing accounts are similarly fee-free.

Automated bill payments

Another way to save time and take the stress out of managing your day-to-day finances is to set up automatic bill payments. This can save you the hassle of organizing payments every month or quarter when you receive your phone, Internet, electricity, gas, or health insurance bills.

You can set up direct debits so that all your regular bills are automatically deducted from your bank balance. This is very simple to do through your online account with each bill provider, or by downloading and completing a direct debit form.

The main benefits of automatic bill payments is that you never have to worry about forgetting to pay a bill, and some utilities and other companies offer a discount when you pay by direct debit.

Are there any risks to automating my savings?

Yes, but you can help keep your finances safe by knowing where your money is going.

The main risk is ending up with insufficient funds in your chequing account if you move too much to your savings, which can leave you with overdraft fees. Check your bank account regularly while you’re getting used to your new savings plan to make sure you’re not transferring too much, or talk with your bank to find out if you’re able to enroll in an overdraft protection program that automatically transfers money from your savings account when your chequing account can’t cover a transaction.

It’s also important to take care before signing a direct debit agreement. When you sign this type of agreement, you may hand control of your funds over to a third party, so it’s important that you trust the merchant you’re dealing with and know exactly what you’re getting into.

Finally, find out ahead of time how to cancel your automated savings plan if you ever need to. Your bank may take several days to process the request or require you to visit a branch in person.

Bottom line

Just by taking a few minutes to set up an automated savings plan, you can quickly start building a bigger bank balance. And the more you manage to put aside each week, the better.

To save the most, compare savings accounts to find one with a competitive interest rate that fits your needs.

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