Can You Add to an Online Savings Account Regularly?

A savings account is a type of deposit account for short- or long-term savings goals. It differs from a checking account in that it's not designed for frequent withdrawals. Frequent deposits, however, are a different story.

Learn how regularly you can add money to an online savings account and why it may be a good idea to increase the frequency of deposits.

How Often Can You Add Money to an Online Savings Account?

Deposit accounts usually don't have limits to the number of times you can deposit money overall, whether adding money with a direct deposit or through mobile app deposits.

However, some bank apps may limit the value of daily deposits you can make through mobile check deposits. For example, if you have a $3,000 daily limit and have already deposited $2,500 that day, the bank may reject a deposit of $500 or more. One way to resolve concerns about daily deposit limits is to speak to a bank representative. They may be able to raise the deposit limit to meet your needs.

Methods To Add to Your Online Savings Account

Banks have changed a great deal over time, and it's no longer necessary to visit a bank in person with a cash deposit or mail an endorsed check to arrive days later. The latest technology provides more seamless and secure ways to fund your savings account.

Direct Deposit: A Convenient Option

When opening a savings account, you may be asked if you want to try direct deposit. This convenient way to add funds requires a one-time setup and then takes place automatically.

Direct deposit involves having all or a portion of your paycheck, child support payment, or Social Security check put directly into savings for when it's needed most. To set up direct deposit, contact the depositing entity, such as your company's human resources department or the Social Security Administration. You will be asked to provide some information to verify identity so that the money gets put into the right account.

If you choose to send only a portion of a payment to savings, make sure to dictate how the rest is handled. Options include depositing the remainder into a checking or another spending account.

Transfer from a Checking Account or Another Bank Account

Moving a portion into a savings account may make sense if you already have money in another account. Setting up a direct transfer from an internal bank (one at the same bank as your savings account) should be easy. A bank representative should be able to initiate the transfer, or you can use the deposit tools available when logged into the bank's website or mobile app.

If setting up a transfer to have funds come in from a different bank, you'll need to use a direct payment service. The bank where you keep your savings account will likely have a preferred service. Activate this payment service so you can move money between different banks whenever it's needed. With this arrangement in place, funding your savings account should be no more complicated than a few clicks from the banking app.

Mobile Check Deposits

Paper checks can be inconvenient, but visiting a branch takes time, and mail may not prove dependable. Using the bank's mobile app to deposit paper checks is a smart alternative that can be done on your schedule and takes just a few minutes to set up.

The app uses your phone or tablet's camera to take a photo of the endorsed check. Then, the app uploads the photo to the bank's servers, where it will be processed for deposit. Mobile check deposits work for both checking and savings accounts.

The Advantages of Regularly Adding Money to Your Online Savings Account

Putting aside cash has many advantages. So, why add to a savings account instead of another type of account? Here are the benefits of growing your savings balance over time.

Compound Interest

One reason people may put money into a savings account instead of keeping it at home is compound interest. Here's how it works:

The principal amount in the account is what you've put in. For a working example, let’s say you begin with a $500 deposit into a savings account.

If the account has an Annual Percentage Yield (APY) of 5%, that $500 becomes $525 after a year. The principal ($500) x APY (.05) = $25 interest. Add the interest ($25) to the principal to get the new amount.

But that's just for the first year. Interest compounds, so the following year, you'll earn another $25 for that original $500, as well as interest on the previous year's $25. 

For the second year, the principal ($525) x APY (.05) = $26.25 interest. 

This happens year after year for as long as you keep money in the bank, making this type of account a powerful tool for saving money and watching it grow, too.

Due to accelerated growth, or the rate at which money grows, you'll earn more and more on the same amount of money each year, even without adding another penny to the account. However, if you continue to make more deposits, the compounding effect multiplies. Each dollar works harder for you than it would have sitting in a jar at home.

Building a Healthy Financial Habit

If you have an online savings account, make regular contributions to it to achieve your financial goals sooner and avoid forgetting to set money aside. When saving becomes a habit, you get used to putting cash aside for important things.

For example, if you follow the 50/30/20 rule of budgeting, you'll put:

• 50% of your earnings toward bills and essentials.
• 30% toward discretionary items.
• 20% toward savings.

The 20% could go into a savings account to help you meet that short and long-term savings goals.

Preparing for Financial Emergencies and Goals

Without a goal for the money in a savings account, it may not seem that important. It could be easy to forget to add to it or even justify using that money in other ways. However, creating a plan for saved money may help you stay disciplined with savings goals.

A few ways to use savings include:

• Emergency fund: Money set aside for unexpected things like medical bills or roof repairs. Without this fund, you may have to dip into other areas of the budget or even take on new debt.
• Short-term savings goals: What do you want to save for? Whether it's to buy books for college or to fund a weekend getaway, putting money aside for specific needs can motivate spending habits.
• Long-term savings goals. The house of your dreams may be a generic idea, for now. Even with just a vague idea of what a future long-term goal will look like, it helps to create a space in the savings plan for this long-term purchase. Weddings, retirement, or a summer abroad are a few other long-term goals that require planning for. 

Final Thoughts

There are more reasons than ever to get serious about saving. With the technology of today's banking apps, you don't even need to get into your car or step out to the mailbox. Saving even small amounts makes it possible to meet bigger money goals, and there's no limit to the number of times you can contribute to a savings account — online or in person.

To see how a savings account can help you stay on track, talk to us at PNC Bank.