We’ve all failed to reach our savings goals at one point or another. My wife and I used to struggle with it constantly. It wasn’t until we started tracking our spending and became consistent with our budget that we began to make any progress toward our financial goals.
One of the best ways to supercharge your savings is to automate it. That way, you are putting your money away before you can even touch it. Of course, technology has come a long way since I first started saving. Now, there are a plethora of online options available to help you get the most out of your money. One great tool is a relatively new product from Betterment called SmartDeposit.
What is Betterment?
For those who are unfamiliar, Betterment is one of the largest online investment services available. What makes Betterment unique is that their system is completely automated. Essentially, you have the option of setting up your investing preferences and letting Betterment’s software do the rest. The fees are low, between 0.25% and 0.40%, and are based on the amount of money you have invested in your accounts.
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For example, after completing your investor profile, you can fund your account on a monthly basis through automatic withdrawals from your bank account. Betterment then automatically invests that money for you. They’ll choose any number of low-cost exchange traded funds (ETFs) in which to invest, and they base it on your personal goals and time horizon. Additionally, Betterment will keep an eye on portfolio drift and automatically rebalance your accounts when needed. You can also set up your account to automatically reinvest dividends, putting the investing process completely on autopilot.
Enter Betterment SmartDeposit
According to Betterment’s research, 60-70% of people don’t keep track of their monthly cashflow. This means that many people are either overspending or oversaving with their budget. While saving money in any form is a good thing, keeping too much money in a bank account can lead to thousands of dollars in lost interest opportunity over an extended period of time. So, keeping with its theme of automated investing, Betterment has introduced a way to solve that problem: SmartDepsoit.
How Does it Work
With SmartDeposit, Betterment customers have all the tools they need to automatically invest their savings overages. When you enroll in SmartDeposit and link your bank account, these overages will automatically be withdrawn and invested by SmartDeposit once your account balance crosses a minimum threshold. You get to determine that threshold by using the “Checking Account Ceiling” feature. This gives you the flexibility of keeping your checking account balance above a preset amount while still taking advantage of potentially higher returns through investing your savings overages.
Here’s how to set it up:
- Sign up for a Betterment account.
- Link your checking account with Betterment.
- Enable SmartDeposit.
- Set your “Checking Account Ceiling.” (Note: This is the point at which SmartDeposit will be triggered.)
- Set your “Maximum Deposit Amount.”
- Relax and let SmartDeposit do all the work!
Again, the best part is that you don’t even have to think about it. Once you enroll in SmartDeposit, the entire process is automated. It does the thinking for you.
Things to Know About SmartDeposit
SmartDeposit will scan your checking account for savings overages at least once a week. If it finds any, the program is triggered to invest the overage into low-cost ETFs according to your investment goals and settings. You can set your “Maximum Deposit Amount” at whatever you like so that SmardDeposit will never invest more than you wish at one time.
You also have the option of skipping deposits if you’d like. Each time that SmartDepost finds an overage, you will be notified that it is going to make a deposit. If you need additional money in your account that month, feel free to skip or cancel any deposits.
SmartDepsoit also scans your account for any regular deposits that are scheduled to be made to Betterment within the next 30 days. If it finds any, it will subtract that amount from your checking account balance, helping to make sure that you don’t dip below your checking account ceiling.
Frequently Asked Questions
- Are there any fees associated with SmartDeposit? Technically, there are no additional fees charged for using Bettermen’s SmartDeposit feature. Additionally, Betterment does not charge transaction fees for each trade. The company’s pricing structure is based on a percentage of the amount you have invested through them. So, because you theoretically will have more money invested, you’ll be charged a higher total dollar amount, but the percentage stays the same.
- Will SmartDeposit work with my IRA account through Betterment? No. Currently, SmartDeposit is only available to be used on taxable accounts.
- Will SmartDeposit work with my bank? Possibly. Unfortunately, the only way to confirm your that your bank is available is to begin the SmartDeposit enrollment process. On the confirm bank tab, scroll down the list to link your bank account. As with everything at Betterment, additional banks will automatically appear on this list as more come onboard.
- How liquid are my investments? Withrawals from Betterment generally take 4-5 business days to reach your checking account. So, if you need the money immediately, making a withdrawal from Betterment is not a great option. However, if you plan ahead, you should easily be able to make it through until the withdrawal hits your account.
- Won’t I have to pay more in taxes? If you’re paying more in taxes, it is because your investment is making more money. So, that is technically a good thing. Additionally, Betterment actively seeks to decrease your tax bill through their automated system. Because you are only charged taxes on gains, Betterment will sell securities that have experienced losses first. Then, they will prioritize what to sell next based on the size of the capital gain.
Invest Your Savings Automatically
Automatically investing some of your savings is a great way to dramatically increase your total savings dollars. Rather than leaving that money in a low-interest account, Betterment’s SmartDeposit feature puts your money to work for you. The best part is that you don’t have to do a thing. Once you create your settings, you can just sit back and enjoy the savings rolling in!