By Philip Taylor
PT Money: Personal Finance,, Twitter @ptmoney

You would expect advice on barriers to saving to center around things that are preventing us from saving money and how to remove those barriers from our lives. But I want to flip this concept on its head, and suggest that there may be barriers that you can use that will actually encourage you to save more money in the long run.

After I landed my first job out of college I decided I wanted to save up money for an emergency fund.  I also tried to start saving for a down payment on a new car.  My strategy was to spend 90% of my paycheck and leave 10% in my checking account until the end of the month.  At which time I would transfer the money to a savings account attached directly to my checking account. 

This was certainly a good idea in theory.  But I always found it hard to reach my savings goals and maintain an emergency fund.  Why? Well, truthfully, I screwed it up.  Inevitably, the next month I would always find a reason to spend that "savings" in the attached savings account.  This was mostly impulse spending.  Getting the money back was as easy as doing an instant transfer back to my checking account.  In a matter of minutes, I would have my money back in my checking account, which was quickly accessed using my debit card.

Then I discovered a few self-imposed barriers that would make it more difficult for me to take money from my savings.  Let's look at how they each work:

Automatic Barriers
Savings in motion tends to stay in motion.  Okay, that's not exactly Newton's law, but it is the concept behind this first barrier.  If you automate your savings efforts (using a direct deposit or electronic bank transfer), you'll be less likely to quit saving each month.  Why?  Because to stop you would have to take on the extra step of going to your human resources department or logging on to your bank account and stopping the automatic deposit or transfer.  This extra step may be just the thing you need to allow you to save more over time.

Delayed Spending: Savings in Disguise

Time Barriers
Speaking of time, not much wreaks havoc on a savings account like an expensive, impulse buy.  So how do you create a time barrier?  The solution is to open a savings account at a separate bank.  This account can still be connected to your checking account, but because it's not the same bank, your funds will take on average three business days to transfer.  Three days is long enough to deter a lot of impulse spending.  Additionally, because you're not looking at you account as often as your checking account, you tend to forget that the money is there.

Find Your Balance: Set a Goal, Make a Plan

Tax Barriers
Would you be less likely to pull your money from savings if you had to pay taxes on it and also pay a 10% penalty?  I know I would.  Create a tax barrier by saving for your retirement in a tax-sheltered account like the TSP, your company 401k, or a Roth or Traditional IRA.  Once your money is in one of these accounts, it's difficult to withdraw the money before retirement without facing some type of monetary penalty.  Knowing this would happen makes it more likely that you won't touch the money to fund your next vacation.

If you take the time to set up these barriers between you and your savings, you'll be more likely to save more money in the long run.  It's worked for me.  I know it will work for you.

Tip of the Day

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