After the holidays are over, it can be difficult to find the motivation to save money. But with an automatic savings plan, you don’t have to rely on willpower alone. An automatic savings plan is a great way to build up your emergency fund without having to think about it—and here’s how you can set one up right now:
Creating an account
While the actual steps for creating an automatic savings account will differ for each company, here is the general idea of what you have to do:
- Go to the company’s website and click on “Open an Account” or “Create an Account.” You will be asked for your name, address, email address and other personal information before being sent to the next page.
- On this page, you can choose between opening a Roth IRA or a traditional IRA with their service provider offering either of these options (and sometimes both). However, if you already have another more established account at another firm that offers one of these two options already established with them (such as Vanguard or Schwab), it’s best not to switch over yet because it might cost money to do so—so we recommend just sticking with what works best for now until you’re ready!
Setting up an automatic transfer
You can set up an automatic transfer from your bank account to your savings account and vice versa. You can also choose to have money automatically transferred between different accounts. For example, you might want to send $50 each month from one checking account into another that’s earmarked for vacation savings.
The key thing to remember here is that the money will be transferred automatically, so you’ll need a transfer amount in mind before setting it up—otherwise, it won’t work!
Choosing your monthly contribution amount
The next step is to decide how much you want to save. You should consider your current financial situation and future goals and then set a realistic goal for yourself that fits your lifestyle.
- How much do I want to save?
- Can I afford to save?
- How much can I afford to save every month?
Saving money automatically
Automatic savings plans are a great way to save money for a specific goal, like a vacation or a new car. By setting up an automatic transfer from your checking account to your savings account, you’ll have less temptation to spend the money and more time to reach your savings goal. The key is picking the right amount and frequency of these transfers so that you’re not overspending on interest payments if your bank account dips below its balance. Different types of banks offer different types of services that can help you save money. For example, in the case of SoFi, you can try Vaults. As per their experts, “Vaults live underneath your Savings account. Use them to earmark money for goals, an emergency fund, or just a rainy day—while still earning the same interest rate on all your money.”
Avoiding common mistakes
- Not having enough money in your account to cover the automatic transfer. You don’t want to go into overdraft because then you’ll get hit with bank fees and bad credit scores.
- Not having the money to cover the monthly contribution. This is easy to forget; it’s best to make it happen automatically!
- Not enough money to cover the bank fee.
- Not enough money in your account before transferring anything over from somewhere else or making other transactions related to it (like depositing checks).
Now that you know a little more about automatic savings plans, it’s time to start saving! We hope you’ve found this guide helpful and informative, but if you have any questions or need help setting up your own account, please don’t hesitate to reach out.
