Many banks offer automatic savings plans, and these can be a great way to develop a regular habit of saving money. At some banks, establishing such a plan is also a way to obtain lower banking fees.
An automatic savings plan is something you need to set up. It simply involves choosing a specific dollar amount that you’re willing to have automatically transferred from your checking account to your savings account, usually once a month and on the same day every month (except when that day falls on a weekend or holiday).
If you have an idea of how much money you generally have remaining after meeting your expenses each month, you can use this as the amount that you transfer automatically to your savings account. On the other hand, you may want to allocate your extra funds to several different places each month, such as a retirement account, investment account, and savings account. In this case, you’ll want to choose a smaller amount. If you don’t know how much money you can safely contribute to a savings account each month, creating a budget will help you figure it out. You can always start with a modest amount, such as $20, and increase it later.
Although some people are nervous about the idea of committing to saving a certain amount automatically each month, most investment gurus say that paying yourself first is a key component of building wealth. The other major benefit of establishing an automatic savings plan is that you don’t have to remember to set aside money for savings each month—your bank will do it for you.