Budgeting Financial Planning Saving Money How to Create an Automatic Savings Plan Put your finances on autopilot and watch your savings grow By Jeremy Vohwinkle Jeremy Vohwinkle Facebook Twitter Jeremy Vohwinkle specializes in retirement planning and has experience as a financial advisor. He also started a financial blog for Generation Xers. learn about our editorial policies Updated on November 11, 2021 Reviewed by JeFreda R. Brown Reviewed by JeFreda R. Brown Facebook Instagram Twitter JeFreda R. Brown is a financial consultant, Certified Financial Education Instructor, and researcher who has assisted thousands of clients over a more than two-decade career. She is the CEO of Xaris Financial Enterprises and a course facilitator for Cornell University. learn about our financial review board Fact checked by Emily Ernsberger Fact checked by Emily Ernsberger Twitter Emily Ernsberger is a fact-checker and award-winning former newspaper reporter with experience covering local government and court cases. She also served as an editor for a weekly print publication. Her stint as a legal assistant at a law firm equipped her to track down legal, policy and financial information. learn about our editorial policies Photo: JGI / Jamie Grill / Getty Images Setting up an automatic savings plan takes the guesswork out of saving each month. With an automatic savings plan, you handle the initial setup, and it's hands-off the rest of the way. If you're ready to amplify your savings efforts, then it may be time to learn how to establish an automated plan for saving and why it's a useful tool for managing your money. A savings account can be a great place to keep your emergency fund, as it's liquid and easily accessible. If you save in a high-yield savings account, you can earn a competitive annual percentage yield in the bargain. Savings accounts are also useful when saving for short- or long-term goals, such as a vacation or down payment on a home. The challenge, however, may lie in making new additions to your savings. You may have the best intentions to save each month, but something—an unexpected expense or a smaller than an anticipated paycheck—makes saving difficult. This unexpected shortfall isn’t an uncommon problem, and it's something many people struggle with as well. But there is something you can do to break the cycle and grow your savings. How an Automatic Savings Plan Works An automatic savings plan is quite simple. You schedule a recurring deposit from your checking account into a linked savings account. How often the deposit occurs depends largely on how often you're paid and your personal preferences. For example, if you're paid biweekly on Fridays, you could schedule an automatic deposit from checking to savings the following Tuesday. That gives your paycheck enough time to clear. Or, if you're paid once per month, you could arrange for a savings deposit to occur automatically along the same timeline. The timing isn't necessarily what's important with an automatic savings plan; it's the consistency of it that counts. Making automatic deposits into a savings account relieves the need to think about it. In essence, money is deposited before you have time to worry about expenses or how much money will be leftover. And when savings are automatic, there's less likelihood that you'll spend it on unnecessary purchases. In fact, once automatic savings deposits become a habit, you may find you don't miss the money at all. You'll be glad of that if an emergency happens and you need to tap into your extra funds. Modern technology makes it very easy to set up an automatic savings plan. It's often easiest to open a savings account at a bank where you have a checking account and link the two. But, you could also link out to a savings account at another bank. And you're not limited to just savings accounts. You can set up a recurring automatic deposit into an individual retirement account (IRA) or a certificate of deposit (CD) account if the CD allows for additional monthly deposits. If you currently have direct deposit through your employer, the simplest and most effective way to establish your automatic savings program is to have part of your paycheck directly deposited into your savings account. It doesn’t matter if it is $10 or $500—simply setting this up will automatically ensure you save money every single time you are paid, and the rest, as usual, will flow to your checking account to cover monthly bills and needs. How to Make the Most of Your Automatic Savings Plan Creating an automatic savings plan is a step in the right direction financially. But it's important to make sure you're utilizing it fully. You can do that by: Regularly review your budget to determine if you have additional money for savings. Set clear goals for your automatic savings—both for the short- and long-term Utilize high-yield savings account to earn the best APY on the money you're setting aside. Choose a savings account with minimal fees, so you get to hold on to all the interest you're earning. Withdraw from your savings only when it is truly necessary. In April 2020, the Federal Reserve eliminated the cap of six withdrawals a month from savings accounts under Federal Regulation D. But making excessive withdrawals from savings is counter-intuitive to the purpose of having an automatic savings plan. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Federal Reserve. "Federal Reserve Board Announces Interim Final Rule to Delete the Six-Per-Month Limit on Convenient Transfers From the 'Savings Deposit' Definition in Regulation D."