What are automatic savings plans and why have them?
Automatic savings plans are exactly what they sound to be. It means that you have a certain amount of money saved automatically on a regular basis.
The point of an automatic savings plan is to force you into saving your money. You can have an automatic investment plan with ING Direct set up weekly, biweekly, or monthly. If you decide you want to save $20 a month, you can set it up so that ING will automatically withdraw it from your linked account every month.
You can even decide how long you want to do this. If you just want to try it out, you could do it for two months and then change it in the future.
You can even save whatever amount you want, there’s no minimum. If you want to save just $5 a month, you can.
With ING, you can even have several different accounts without having to reapply. I opened one up for college tuition, one for books, and one for other savings. I just recently opened up a new account for a house and put in an automatic investment of $2 a month, just for the heck of it.
The best part about automatic investments is that you just forget about it. If you put a weekly investment of $5 and you get paid weekly, soon, you will just automatically deduct it and it will feel no different than paying social security.
That $5 a week won’t be missed, but after a year when you have $260, you will certainly take not and be glad you didn’t waste it on snacks and soda.
This automatic idea is not only for savings, but it is also available for investments. At sharebuilder, you can schedule automatic investments on Tuesdays. It still costs $4 per investment. All you have to do is program which investment you want to make and schedule it weekly, biweekly, or monthly.
You choose the stock and how much you want to invest. If you decide you want to invest in Coke every month you can schedule it. You can’t schedule it for a certain amount of time, but they have an even better plan. You can cancel it whenever you want, and it won’t make the investment unless you have the funds.
This means, if you have $100 per month set up for Coke and you have no money in your account when the trading day comes, they won’t invest. You don’t have to worry about paying any fees because they just assume you decided you couldn’t invest for that month. It’s foolproof.
Sometimes we might love saving and investing and just look for money to do so, but other times, we have a hard time letting go of our dollars. Automatic plans force us into a good habit and, with time, are very rewarding.
