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. Compounding

    The ability of an asset to generate earnings, which are then ...
  3. Personal Finance

    All financial decisions and activities of an individual, this ...
  4. Savings

    According to Keynesian economics, the amount left over when the ...
  5. Accumulation Period

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

    A phrase commonly used in personal finance and retirement planning ...
Related Articles
  1. The 5% Solution To Financial Freedom
    Retirement

    The 5% Solution To Financial Freedom

  2. Debunking 10 Budget Myths
    Budgeting

    Debunking 10 Budget Myths

  3. Voluntary 401(k) Contributions: A Thing ...
    Retirement

    Voluntary 401(k) Contributions: A Thing ...

  4. 5 Ways To Lose Your Retirement Nest ...
    Savings

    5 Ways To Lose Your Retirement Nest ...

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center