Automatic Savings Plan

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Nest Egg

    A substantial sum of money that has been saved or invested for ...
  2. Pay Yourself First

    A phrase commonly used in personal finance and retirement planning ...
  3. Accumulation Period

    1. The phase in an investor's life when he/she builds up his/her ...
  4. Personal Finance

    All financial decisions and activities of an individual, this ...
  5. Offset Mortgage

    A type of mortgage that involves blending a traditional mortgage ...
  6. Compounding

    The ability of an asset to generate earnings, which are then ...
RELATED FAQS
  1. How does the trust maker transfer funds into a revocable trust?

    Once a revocable trust is created, a trust maker transfers funds or property into the trust by including them in a list with ... Read Full Answer >>
  2. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>
  3. How much will an employer generally contribute to a 401(a) plan?

    The amount an employer contributes to an employee's 401(a) retirement savings plan can vary from plan to plan. 401(a) plans ... Read Full Answer >>
  4. When can benefits be received from a provident fund?

    Like most retirement savings vehicles, participants in provident funds are eligible to receive benefits at retirement. However, ... Read Full Answer >>
  5. Is Social Security Income a perpetuity?

    Because Social Security income does not continue indefinitely, it cannot be classified as a perpetuity. What Is a Perpetuity? A ... Read Full Answer >>
  6. What types of investments are allowed in a provident fund?

    Different provident funds have different investment rules and restrictions. The allowable investments in an Indian provident ... Read Full Answer >>
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. Options & Futures

    Can You Retire In Five Years?

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

    8 Reasons To Never Borrow From Your 401(k)

    Find out why dipping into your future savings can have serious consequences.
  9. Budgeting

    Save Without Sacrifice

    Don't sacrifice your life for your savings - get out there and have fun!
  10. Home & Auto

    Are Home Inspections Worth It? - Price vs. Value

    If you’re wondering whether home inspection is worth the investment, the following information will help you decide.

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
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!