Automatic Deposits, or automatic payment plans, are a great way to save money without trying. Money is automatically transferred out of your daily account into a savings/investment product: you choose how often, how much and how to invest, and it happens automatically after that.
Why You Should Have One
Having an automatic deposit means you’re saving money. Here are 10 reasons to set up an automatic deposit now:
1.Out of sight, out of mind. Pay yourself first. We’ve all heard this advice before, and that’s because it makes solid financial sense. You plan for monthly expenses, so why not plan for monthly savings—first. And here’s the bonus: you’ll be less tempted to spend that money once it’s in a saving account.
2.Every cent counts. Whether you can afford to save $5/week or $500/week, saving money is a healthy habit that everyone should practice. From high-interest savings accounts to investments such as index-linked term deposits, there are programs suited to every budget.
3.Saving is addictive. Watching your savings grow is incentive enough to invest even more. If you increase that $100/week commitment to $125/week, your annual savings will jump $1,300 from $5,200/year to $6,500/year. And that doesn’t even include interest! Want to find out how much your rate of return will be when you factor in interest? 4.Regular is better. Capitalize on the power of interest by making regular contributions rather than lump sums. To many people, saving $100/week seems more achievable than saving $400 at a time.
5.Do the math. Saving weekly is better than monthly. Case in point: $100/month X 12 months = $1,200. $25/week (which equals $100/month) X 52 weeks = $1,300 year.
6.Banish the borrowing. When tax time comes around, are you scrambling to scrape together an RRSP contribution or take out a loan? Set up an automatic deposit for your RRSP so you’re feeling flush come tax time.
7.Change is easy. Automatic deposits are usually easy to change if your financial circumstances experience an upswing or downswing.
8.Weather the storm. Opt for Canada’s newest tax shelter tool—a Tax-Free Savings Account—and not only will you be building a tax-free nest egg, your Tax Free Savings Account can also act as an emergency fund. There’s no penalty to withdraw funds and you can re-contribute the money in the following tax year.
9.Saving tax at source. One you get into the habit of making regular RRSP contributions, you can request that the Canada Revenue Agency (CRA) deduct less tax from paycheque. You won’t get a hefty refund come tax time, but that’s because your funds stay in your account (and earning interest)—instead of the CRA’s.
10.Hit the target. Before you set up your automatic deposit, determine your goal so that you’re virtually guaranteed success in reaching it. For example, if you plan to save $6,000/year, you’ll need to put away at least $500/month.
As a BC credit union member, your deposits now carry unlimited deposit insurance protection*.
You don't need to be a financial expert to plan for your retirement, you just need to know one. Contact Interior Savings today.
Deposits are 100% guaranteed. Protection provided by the Credit Union Deposit Insurance Corporation of British Columbia.