Saving money is the foundation of financial planning. As natural as it may sound, lack of time, funds and sometimes, knowledge, can make it hard to achieve. This is where automating your savings can make it easy. Automating your savings is when a specific amount automatically transfers to your chosen investment avenues, as per a schedule that has been fixed earlier. This completely removes the step of manually transferring funds every month. Let’s understand how this works and how it can help,
Know what is an automatic savings plan and how it works
An automatic savings plan eliminates your temptation to spend by transferring a specific amount directly from your primary account to your designated Savings Account, at regular intervals, say on a monthly basis. It reduces the manual task of paying bills and helps in routine cash management.
The process is straightforward - you need to choose the amount and frequency as per your preference. This helps you consistently save towards goals, build an emergency fund, and avoid the battle between saving and spending.
Ways to automate your savings
Set up automatic transfers
One of the simplest and most effective ways to automate your savings and reach your financial goals is by setting up automatic transfers to your Savings Account. Most banks in India offer services to schedule recurring transfers on a specific date each month. Depending on your budget, you can determine a realistic amount while aligning with your financial goals.
Streamline recurring expenses
As the first step towards building a corpus for your future needs, make it a point to clear your regular expenses first. This way you know exactly how much of your income you can invest. To achieve this, set up auto-debits for such recurring payments such as Credit Card bills, loan EMIs or utility bills, instead of paying them manually every month. This also helps in timely payments and leaves you stress-free from missing any payments.
Choose the right type of investment
Today, you can find varied investment options that can help you save enough monthly. Below are some options -
- Recurring Deposits: Most banks offer various types of RD accounts wherein you can save a stipulated amount each month and earn compounding interest. You can start with small amounts and get assured returns.
- Fixed Deposits: FDs are a great option to save if you have a lump sum amount to invest. But you need not keep waiting to save your desired amount and then invest. Axis Bank Auto Deposit links your existing Savings Account and automatically transfers multiples of ₹5,000 to an FD every time your account balance crosses ₹25,000.
- Mutual Fund SIPs: You can also invest regularly in Mutual Funds of your choice via Systematic Investment Plans. This ensures that a fixed amount is deducted from your Savings Account and invested in the Mutual Fund. You can decide the amount (it can be as low as Rs 100) and the date on which it should be deducted from your Savings Account, and automate the process.
- Other options: You can take small steps like choosing a Reward Credit Card that rewards you on every spend. You may even use apps that analyse your spending habits and identify areas where you can save.
Maximise salary deductions
An effective way to automate your savings is by maximising your salary deductions offered by your employer. You can contribute a larger portion of your salary towards schemes like the Employee Provident Fund (EPF) and the National Pension Scheme (NPS). These contributions save you money as they are exempt from tax.
Also Read: These are the mantras you need to learn to boost savings
Monitor and adjust your savings plan
Even if your savings are automated, you must regularly monitor and adjust your plan to stay aligned with your changing priorities and future goals. It's important to keep increasing your investments as you grow in your career.
In conclusion, automating your savings appropriately helps you achieve financial stability and reach your long-term goals.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
Disclaimer: Mutual Fund investments are subject to market risk, read all scheme related documents carefully. Axis Bank Ltd is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Purchase of Mutual Funds by Axis Bank’s customer is purely voluntary and not linked to availment of any other facility from the Bank. *T&C apply
