So, you have your bank accounts set up. Good work, now for this next exercise, I’ll assume you have a checking account, a savings account and a job. If you don’t have all of these three things, turn off the computer and walk away, I can’t help you. If you do, read on and I’ll explain this whole Direct Deposit thing.
Simply put, Direct Deposit is the automation of payroll. What that means to you as an employee, is that when you wake up on payday, your check is in the bank already. No going to the bank, no waiting on lines, no standing next to people of questionable hygiene. Your employer takes a check from you(which you void out of your check book) to obtain your account information. They need your banks routing number, otherwise known as an ABA number and your checking account number. They enter this information into thier payroll services and when it comes time to pay you, they send the money , you ready for this?, Directly to your bank account.
Most banks do not place a hold on Payroll checks either, so that means your money is available for withdrawal right away. So when you wake up on any given payday, your money is already in the bank and waiting for you. Saves you time and gets your money into your account faster, which helps save you from the overdraft fees we spoke about earlier.
Easy enough for the employee right? So what about employers? Well using a Direct Deposit service can save your business time and money. After the initial setup, you can pay all of your employees in minutes from that point on. All you have to do in most cases is enter how much money you need to send each employee and hit the payment button. You can eliminate mountains of paperwork, and keep track of everything electronically. Why would you NOT do this? Some programs even come with handy worksheets that will figure out the pay for you. When you add an employee you add their rate of pay, tax rate and any deductions for say medical or retirement accounts. When you hit total, it will tell you how much to send the employee, how much to hold for taxes and how much to send to thier 401K or what not.
In an upcoming post I’ll actually explain in clear terms how to use your direct deposit to help you boost your savings when you create a budget, look forward to the “How to build your first budget” post, coming soon to an RSS reader near you.
Next post: Use online banking or the earth gets it…