Automating Your Savings: A Financial Hack for Beginners

AI is taking over - but not in the way sci-fi movies imagined. It's not robots running the world, but something much smarter (and less dramatic). With AI, more sophisticated algorithms are transforming everyday tasks, especially how we manage money.

These advanced systems don't just follow basic rules. They analyse your spending habits, predict your future expenses, and automate your savings accordingly. No more setting reminders or making manual transfers. It's like having a money-savvy assistant who learns your lifestyle and quietly builds your savings in the background. It sounds like a takeover the consumers of today can actually get behind.

Set up automatic transfers

Automatic transfers let you move money from your salary account to another savings or investment account on a fixed schedule. You can set it to happen daily, weekly or monthly, depending on your goals. It's a "set it and forget it" approach that ensures you're consistently saving without needing to remember every month.

This takes away the mental load of remembering to save. It builds financial discipline, as the money is transferred before you get a chance to spend it. This is useful for long-term goals like building an emergency fund or saving for a big purchase.

Every month, as soon as the salary is credited to the main account, a portion is automatically transferred to a separate account. This transfer happens on the 1st of each month before there's a chance to spend the money on other expenses. Over a year, this method accumulates a healthy amount in the home savings account, without any manual effort.

Make the most of the auto-sweep facility

An auto-sweep facility links your savings account with a fixed deposit (FD). Whenever your savings account balance crosses a certain threshold, the excess amount is automatically moved into an FD to earn higher interest. If you ever need the money, the FD is "broken" automatically and the funds are transferred back to your savings account.

This facility gives you the best of both worlds - liquidity (easy access to your money) and higher returns (thanks to the FD interest rates). Unlike a regular savings account that offers lower interest, the funds parked in an auto-sweep FD earn a higher interest rate. This means your money works harder for you.

Auto-renewal of fixed deposits and other investments

When your fixed deposit (FD) matures, you have two options: withdraw the amount or renew it for another term. With auto-renewal, your bank reinvests the principal (and sometimes the interest) into a new FD for the same tenure and at the prevailing interest rate. This feature applies to other investments, too, like recurring deposits (RDs) and some types of mutual funds.

This feature ensures that your money doesn't stay idle after the FD matures. If you forget to renew or reinvest the amount, it might end up in your savings account, earning lower interest. Auto-renewal keeps the investment going, maximising returns over time.

When a fixed deposit of ₹1,50,000 matures after one year, earning 6% interest. Instead of letting the amount sit idle, the auto-renewal feature reinvests the full amount into a fresh one-year FD at the prevailing interest rate. Over time, the amount continues to grow with compound interest. Since the auto-renewal happens automatically, there's no need to track maturity dates or manually request reinvestment. This ensures the money remains invested without gaps, allowing it to grow steadily over the years.

Conclusion

Automating your savings is the right way to give direction to your future plans.

This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.