Current Date: 28 Sep, 2023

The Benefits Of Automatic Savings And Investment Plans

We can all agree that handling money can be difficult, especially with many things to consider. Cash tends to escape our grasp despite our best efforts. Most of us have made a long list of financial objectives.

Goal-setting is nice, but it doesn't help much if we continually fail to achieve them, and not saving enough money is a problem that seems to be affecting everyone. The Centre for Retirement Research estimates that only around half of all American workers have saved anything for retirement.

Fortunately, there is a procedure that relieves us of the responsibility for saving and investing and transfers our responsibility for saving and investing to a much more trustworthy entity—automated saving and investment accounts. If these accounts are set up properly, they can significantly improve your bottom line. Automating your investments and savings can assist you in building wealth and achieving that financial security.

Also Read: The Impact Of Inflation On Your Savings And Investment

An Effective Way To Save And Invest

The most effective technique to fund your savings and investment accounts is, without a doubt, automation. Plans for automatic investments let you make contributions at predetermined periods without having to do anything.

Every time you get paid, the money can be configured to be deducted immediately from your bank account. In essence, you're "paying yourself first,"—which is advantageous if you're attempting to accumulate wealth. Willpower is not required with automation. 

Automated payments are a regular element of the budget rather than investing whatever is left over after all other expenses are covered. This procedure produces a steady, consistent stream of investment contributions. And that is, more than anything else, the secret to becoming wealthy in the stock market, particularly if you put your money in low-cost index funds.

Automated savings accounts operate on the same tenet and are just as successful at helping you accumulate wealth. You can easily build a savings account by regularly moving a portion of your salary there. You can also easily build a much-needed "rainy day fund" for emergencies by regularly transferring a percentage of your paycheck into your savings account. Such a nest egg could be a lifeline in a severe financial catastrophe.

Some consumers might be worried about liquidity because automation allows them to lock up a portion of their income with less flexibility in case unanticipated financial requirements emerge. Following an automated contribution schedule for a few months should provide enough buffer to put your mind at ease.

Automating your savings and investing can have several advantages that aid in wealth accumulation and monetary stability. 

The following are the key benefits:

  • Increased Discipline and Consistency: Automating your savings goals and investment commitments helps to maintain consistency, thereby making it easier to maintain your discipline.
  • Compound Interest: By making regular contributions, you can leverage the benefits of compounding and see a long-term increase in your savings or investments.
  • Increased Savings: Automation enables you to save more by setting aside a predetermined sum or portion of your monthly paycheck. Only 36% of Indian employees save regularly, according to a report by ET Wealth, underscoring the necessity of giving savings and investing a top priority.

How to Set Up Automatic Investments and Savings

A quick and efficient strategy to reach your financial objectives is to automate your investments and savings. 

Following are some easy methods for setting up automation:

  • Determine How Much to Save and Invest: The first step involves choosing how much you want to invest and save each month. Your financial objectives, income, and outgoings will all affect this. As a general guideline, aim for a savings rate of at least 20% of your income.
  • Select the Proper Tool: You may automate your savings and investments using various tools and apps. Using the UPI auto-debit option, you can automate transfers from your bank account to your savings or investment account.
  • Digital wallets: Digital wallets with an auto-debit option, like Paytm and PhonePe, let you set aside or invest a certain amount each month.
  • Investing Apps: Easy-to-use investing platforms with automated investment capabilities are available through apps like Groww, Paytm Money, Piggybank, and ET Money.
  • Configure Auto-Debit: Once you select the appropriate platform, set up automatic transfers to your registered savings or investment account. You can set up auto-debit for your mutual fund SIPs, automatically investing a certain amount at regular intervals.
  • Track Your Development: You must keep an eye on your automated savings and investments. It's critical to regularly check your automated savings and investments to make sure you're on pace to reach your financial objectives. By keeping track of your assets, you can verify that you're saving enough money each month and make any required changes to your strategy.

Also Read: The Importance Of Interest Rates On Your Finances

In conclusion, automating your investments and savings is a simple method to reach your financial objectives. It promotes self-control, guarantees regular contributions, and increases your money over time. Thanks to the appropriate tools and software available across several platforms, such as Chip and Piggybank, automating your savings and investments is now easier than ever.

Excellence Chukwuma Chukwunaedu

Excellence Chukwuma Chukwunaedu

I enjoy marketing, technology and business. I help businesses and brands connect with their ideal customer profiles and build products that excite them and solve their problems.