Posted by: Howard Dvorkin, CPA
Date of post: June 20, 2016

You've heard the term "direct deposit," but you probably don't know what else it can do.|You've heard the term "direct deposit," but you probably don't know what else it can do.

Recently, a young fiancee asked me how to save me how to save more money for her honeymoon. I told her to split.

It’s not what you think.

This woman, who I’ll call Debra, had a problem. While she took my advice and had an honest conversation with her fiance about her spending and savings habits, she neglected to tell him one crucial detail: If she has money in her hand, it takes all her willpower not to spend it.

She was reluctant to reveal this fact because her fiance is so disciplined. While he earns less than Debra, he saves more.

“How can I save money for my honeymoon without blowing it first on silly things?” she asked me.

It turns out that Debra’s solution is something many employees have access to, but they don’t realize it even exists: split direct deposits.

Some experts estimate three quarters of U.S. employees use direct deposit. There’s no data, however, on how many separate accounts they send their money to.

That’s right, many employers allow you to automatically deposit your paycheck in pieces. That’s what Debra did.

“I set aside $50 every two weeks and had it sent directly to my savings account — which, I must admit, was collecting dust before this,” she says. “Now I have a couple hundred dollars saved up because I never notice it missing.”


Here’s how it worked for Debra, and how it can work for you…

1. Talk to your HR department

“I contacted our Human Resources team, and they directed me to the online benefits portal,” Debra says. Her company uses ADP, a popular payroll servicer for many companies.  Debra simply logged in and  added an additional bank account. If your employer doesn’t have an online portal, just ask your HR team for the necessary paperwork needed to set up multiple direct deposit accounts.

2. Assemble the information

You’ll need your routing and account numbers. More than likely, you’ll have to provide a blank, voided check for each account you want to set up. Your HR team can tell you specifically.

3. Decide how many accounts you want to set up

It doesn’t have to be just two. Your employer might allow three or more checking and/or savings accounts. This is something Debra plans to explore after she’s married. “We’ll have a joint checking account, but we might keep our separate accounts, too,” Debra says.

4. Decide how much will go into each account

I’m sure you’ve heard financial experts like me advise, “When you get a raise, don’t spend it! Don’t increase your standard of living! Save it for retirement!” Just how are you supposed to do that? Well, it’s easy with split direct deposit. When you get a raise, take that amount and send it directly to another account, where you won’t miss it.

So why don’t more employees know about this easy savings tool?

“I don’t think employers do the best job of letting them know it’s available,” says Trisha Zulic, a Technology and Human Resources Management panelist with the Society of Human Resource Management, better known as SHRM. “When you talk about [employee] benefits, you think about wellness. But what many employees are missing is the financial wellness.'”

So are many employers. Fortunately, that’s changing, because bosses have realized that financially stressed-out workers are often distracted and even worn out from worrying about money. That’s why you see more programs like “Knowledge of Financial Education.” Better known as KOFE, it works directly with employers to educate their staffs about how to spend less and save more.

So if you want to “split it and forget it,” ask your HR team for help right now.