An automatic savings plan allows you to have money automatically moved to savings according to a set schedule. The outcome is that no effort is required to move the money to savings each month; it will be moved automatically for you once it is set up.
Setting Up an Automatic Savings Plan
You can set up an automatic savings plan through your bank's website by looking for a recurring transfer or automatic savings plan option. Input the date of the first transfer, the amount of the transfer, and the frequency of future transfers and you are ready to go.
How to Use an Automatic Savings Plan to Reach Your Savings Goal
One way to use an automatic savings plan to reach a savings goal is to decide on the
You can also use an automatic savings plan to save an amount of money that you decide you won't miss. For example, you may decide that you won't miss $10 a week and choose to set up a savings plan for that amount. The outcome is that you will have $10 less a week in your checking account and, without noticing much difference in your daily life, you are slowly building up a savings.
Pitfalls of Automatic Savings Plans
If you choose to set up a savings plan, be careful to avoid some common pitfalls. First, avoid overdrawing your checking account by forgetting when withdrawals will occur. Scheduling transfers shortly after payday reduces this risk.
The second priority is to remember that your savings account should not be used for regular expenses. If you are regularly using savings accounts for your monthly expenses, either you are unrealistic in how much you are saving each month or you need to rework your budget to fit within your means.
An automatic savings plan is a great way to make saving a habit. Because it does not require conscious thought each month, it makes saving easy and consistent. As long as you consider your savings goal and budget as you set up your plan, you will soon find your savings account growing.
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