Automatic Savings Plan


DEFINITION of 'Automatic Savings Plan'

A type of personal savings system in which the plan contributor automatically deposits a fixed amount of funds at specified intervals into their investment account. The typical structure of this type of savings system is an automatic transfer from an individual's bank account into a different savings or investment account every two weeks. Then, every time the individual receives a paycheck from their employer, their desired savings amount is automatically transferred into their savings account.

BREAKING DOWN 'Automatic Savings Plan'

An automatic savings plan has other advantages than just the convenience of not having to manually deposit funds into your savings account each month. For instance, this type of system makes it easier to stick to a personal budget, since it is harder to overspend and dip into your savings once they are automatically removed from your bank account.

This type of system also helps investors continue contributing savings to their investment portfolio over a long period of time, something that can become emotionally difficult to keep up after suffering losses on a few investments or personal experiences.

  1. Nest Egg

    A substantial sum of money that has been saved or invested for ...
  2. Accumulation Period

    1. The phase in an investor's life when he/she builds up his/her ...
  3. Pay Yourself First

    A phrase commonly used in personal finance and retirement planning ...
  4. Savings

    According to Keynesian economics, the amount left over when the ...
  5. Personal Finance

    All financial decisions and activities of an individual, this ...
  6. Compounding

    The ability of an asset to generate earnings, which are then ...
Related Articles
  1. Retirement

    The 5% Solution To Financial Freedom

    How can you save the recommended 10% of your income? We'll show you how to get there.
  2. Budgeting

    Debunking 10 Budget Myths

    Don't let these excuses prevent you from reaching your financial goals.
  3. Retirement

    Voluntary 401(k) Contributions: A Thing Of The Past?

    Contributing to your retirement plan may no longer be voluntary, but automatic enrollment has a number of benefits.
  4. Savings

    5 Ways To Lose Your Retirement Nest Egg

    These common mistakes can put your savings at risk. Find out how to avoid them.
  5. Retirement

    Are You Saving Too Much?

    "Spend now! Don't worry about retirement," say some experts. Could they possibly be right?
  6. Options & Futures

    Handling High-Yield Savings Accounts

    Is this the savings route for you? Read on to find out what these accounts have to offer.
  7. Budgeting

    Save Without Sacrifice

    Don't sacrifice your life for your savings - get out there and have fun!
  8. Options & Futures

    Can You Retire In Five Years?

    The countdown is on. Find out whether you'll be ready to leave the working world.
  9. Budgeting

    8 Reasons To Never Borrow From Your 401(k)

    Find out why dipping into your future savings can have serious consequences.
  10. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  1. How does a Roth IRA grow over time?

    Your Roth IRA account grows over time thanks to two funding sources: contributions and earnings. While your contributions ... Read Full Answer >>
  2. Can my 401(k) be seized or garnished?

    As long as your retirement funds are held in your 401(k) and you do not take them as distributions, your 401(k) cannot be ... Read Full Answer >>
  3. Can my IRA be taken in a lawsuit?

    Whether your IRA can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There ... Read Full Answer >>
  4. Are mutual funds considered retirement accounts?

    Unlike a 401(k) or Individual Retirement Account (IRA), mutual funds are not classified as retirement accounts. Employers ... Read Full Answer >>
  5. Can my IRA be garnished for child support?

    Though some states protect IRA savings from garnishment of any kind, most states lift this exemption in cases where the account ... Read Full Answer >>
  6. Can I use my IRA savings to start my own savings?

    While there is no legal reason why you cannot withdraw funds from your IRA to start a traditional savings account, it is ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!