How to Create an Automatic Savings Plan

An automatic savings plan is your answer to planning for retirement. It is an opportunity for you to simply put money aside for your use during retirement without …

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An automatic savings plan is your answer to planning for retirement. It is an opportunity for you to simply put money aside for your use during retirement without even thinking about doing it. If you are the type of person who could burn through $100 within minutes of having the cash in your hands, you will benefit from an automatic savings plan. If you are the type of person who never gets around to opening or investing in your accounts, this type of plan is ideal for you, too. It does something very simple – it takes the guesswork and planning out of the process.

Tips to Create an Automatic Savings Plan

The benefits of using this automatic plan are easy to see. By putting money into your investment portfolio (no matter what it is made up of) on a consistent basis, you will be benefiting from compounding interest at a faster rate. Instead of investing just one time a year in your account, put in a small amount every week or every other week. How can you set up a plan like this?

Consider an IRA

Determine which type of account you would like to use as your automatic savings plan. A good option is to set up an IRA or ROTH IRA for your investments. As your paycheck is deposited into your bank account, a portion of it can automatically be sent to your retirement plan. You do not have to make this move on your own.

Make Your Investments Work for You

For those who do not have automatic deposit like this, there are other steps you can take to make your investing automatic. For example, some investment firms allow you to set up a plan in which the company automatically withdraws funds from your checking or savings account on the pre-determined day. You do not have to do anything about it. It can be a reoccurring transaction you pay into every week or other week. It’s easy to funnel $25 a week into an investment account whereas $100 a month seems like much more.

Even Your Bank Can Help

When it comes to making it even easier for you, start with a savings account. Have your bank automatically withdraw a certain amount from your paycheck deposit each week and move those funds into a savings account. Make it an untouchable account – one that you do not touch unless there’s an emergency. You can even roll it over into a CD or other investment later on when it reaches a larger amount. You will not even miss it.

By making these investments automatic, you do not have to think about them or plan to use them. They just happen. This does matter, too. By investing small amounts on a consistent basis, your investment portfolio continues to grow. The sooner money hits that account, the sooner interest can build on it. This means the value will continue to increase at a faster rate. You will earn more and earn it faster. That’s critical for those who want to plan for their future, no matter if that is home buying, retirement planning or for a luxury trip around the world. Make it automatic.

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