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Automatic vs. Manual Saving Plans

It’s often the case that people don’t put enough money into their savings accounts and have inadequate emergency funds. This makes it more difficult to budget each month and save more in the long run. Since most Americans don’t save enough for retirement or emergencies, it’s crucial to understand how to optimize your savings. Follow this guide to learn about automatic vs. manual saving plans to determine which one will work best for you.

Direct Deposit Into Savings Plan

Direct deposit is an easy way to have a set amount deposited into your auto saving account every pay period, which can help ensure you don’t spend it. For example, if you want $100 automatically put into savings each month, ask your employer if they offer direct deposit and link that account with your bank. 

Some banks like SoFI Invest (SoFi Bank) offer more benefits than other institutions. According to the experts at SoFi, “Not only does SoFi supercharge your savings with 33x the national checking rate, but it also has no account fees and offers 2-day paycheck with direct deposit.”

What is an Automatic Savings Plan?

An automatic savings plan is a program set up by your employer that requires you to set aside a portion of your paycheck before you receive it. This setup makes saving money effortless and can also help you reduce the debt because savings come out of your paycheck before other expenses (like credit card payments). For example, when an employer creates an automatic payroll deduction for 401(k) or retirement plans, many refer to it as a Safe Harbor plan.

What is a Manual Savings Plan?

A manual savings plan is when an individual decides how much money they want to save monthly and when they want to save it, regardless of income level or other factors that might necessitate increasing spending. This process can be time-consuming and involve several steps. It also prompts some difficult decisions about how much money you need to save and whether those goals are realistic.

What Are the Benefits of Each?

  • Automatic savings plans save you time by automatically transferring a portion of your paycheck into a savings account or retirement fund. You don’t have to think about it or do anything extra to make sure it happens.
  • A manual plan gives you more control over how much and when you save, but it also requires that you remember to set aside money each month and transfer it into your savings account (or wherever else you choose).
  • In most cases, automatic savings plans are best for beginners because they take away some decision-making processes around saving money.
  • It’s important to note that both automatic and manual saving methods require discipline on your part—and if you don’t have enough discipline to stick with one method, chances are you won’t stick with either one.

Which Option Should You Choose?

It’s a common misconception that automatic saving is always better than manual saving, but that isn’t necessarily true. The best option for you depends on your level of self-control and financial goals; consider all factors before deciding.

With a manual savings plan, you will have to confront your finances each time you want to make a purchase. This may lead you to reconsider unnecessary purchases. However, you can rest assured that money is regularly set aside for retirement or other financial goals with an automatic savings plan.

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