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. Offset Mortgage

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

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

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

    According to Keynesian economics, the amount left over when the ...
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. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center