Automating your savings and investments is a great way to ensure you consistently save and maximize returns on your investments. Automating your finances allows you to take the stress out of saving and investing, as your accounts are managed for you and your funds are invested in the right places for maximum returns (or at least that's how it's meant to work).

In this article, we’ll cover the benefits of automating savings and investments, tips for doing so, different types of investment accounts, how to set up automated savings and investment accounts, finding the right investment platforms, taking advantage of tax benefits, making adjustments to your automated plan, when to rebalance your portfolio, and monitoring your investment performance.

Please note, this does not constitute investment advice. Please see a licensed financial advisor before making any decisions (our lawyers made us add this).

Benefits of Automating Savings and Investments

One of the main benefits of automating savings and investments is that it eliminates the need for you to manually move money around. With automation, your money is automatically transferred from your paycheck or checking account into a specific savings or investment account. This eliminates the need for you to remember to transfer funds and helps you stay on track with your savings and investment goals.

When you automate your savings and investments, you also remove the temptation to spend the money on something else. Studies have shown that people are more likely to save money when they set up an automatic transfer. Automation allows you to save without having to make a conscious decision each time.

Finally, automation makes it easier to diversify your investments. You can set up automatic transfers into different types of accounts and funds, allowing you to diversify your investments without having to manually move money around.

Start by Setting Some Goals

Setting goals is a great way to help level set your expectations about what it is you want to achieve out of a given process or effort. In doing the research for what is the right goal, you'll undoubtedly uncover lots of data, stories and anecdotes that will help you better prepare for you upcoming plans.

If setting goals is your thing (like it is mine) then this is where Elephants comes in. Elephants is the easiest place to set and manage all your personal goals, and makes it super simple to add accountability and support partners too, if that tickles your fancy.

Now, lets get into the tips.

Tips for Automating Savings and Investments

When automating your savings and investments, there are a few tips to keep in mind. First, make sure that your automatic transfers are appropriate for your goals. For example, if you’re saving for retirement, make sure that you’re transferring enough money into your retirement fund each month. Next, make sure that you set up the transfers from the correct accounts. If you’re transferring from a checking account, make sure that there is enough money in the account when the transfer is due.

Another tip is to allow for some flexibility in your automatic transfers. If you come into unexpected money, you may want to divert some of it into a savings or investment account. Having some flexibility with your automation allows you to take advantage of opportunities as they arise.

Understanding the Different Types of Investment Accounts

Before setting up automated savings and investment accounts, it’s important to understand the different types of accounts available. The most common types of accounts are taxable accounts (such as brokerage accounts) and tax-advantaged accounts (such as 401(k)s and IRAs). Taxable accounts are used for investing money that is not tax-advantaged and can be used for short-term goals. Tax-advantaged accounts are used for long-term goals and provide tax benefits when funds are withdrawn.

In addition to taxable and tax-advantaged accounts, there are also other types of investment accounts such as 529 college savings plans, health savings accounts (HSAs), and roth accounts. Each type of account has its own advantages and disadvantages, so it’s important to understand which type of account is best for your goals before setting up automated transfers.

Setting Up Automated Savings and Investment Accounts

Once you’ve chosen the right accounts for your goals, you can set up automated transfers to ensure that your money is transferred into them each month. Most banks have an online feature that allows you to set up automatic transfers from one account to another. You can also set up automatic transfers from your paycheck into your investment accounts.

When setting up automated transfers, it’s important to consider how much money you can afford to transfer each month. You also want to make sure that the transfers are consistent so that you’re not overspending or under-saving. Finally, be sure to double-check that the transfers are going into the correct accounts.

Finding the Right Investment Platforms

Once you’ve set up automated transfers into your investment accounts, it’s time to choose an investment platform. An investment platform is a website or app that allows you to buy, sell, and trade stocks, bonds, mutual funds, ETFs, and other investments. The platform should offer a wide range of investments at low costs, as well as features such as real-time quotes, news updates, market research tools, portfolio performance tracking, and more.

When choosing an investment platform, it’s important to consider factors such as fees, customer service, user reviews, security protocols, and whether or not it offers the types of investments you’re looking for. Once you’ve chosen an investment platform, you can easily set up automated transfers into different funds or stocks on the platform.

Taking Advantage of Tax Benefits

When investing using tax-advantaged accounts such as 401(k)s or IRAs, there are certain tax benefits that can help you save more money in the long run. Contributions to these accounts are typically tax deductible, which means that the amount you contribute is subtracted from your taxable income for that year. This can lower your taxable income and reduce the amount of taxes you owe.

Additionally, any earnings in these accounts are tax-deferred until you withdraw them. This means that any earnings accumulate without accruing taxes until they are withdrawn. This can lead to significant tax savings over time.

Making Adjustments to Your Automated Plan

As with any financial plan, it’s important to periodically review and adjust your automated savings and investment plan. As your goals change over time or as your financial situation changes, it may be necessary to adjust your plan accordingly. For example, if you come into unexpected money, you may want to increase your automated transfers into savings or investments.

You may also want to adjust the amount of money that you’re transferring into each account. For example, if one account is performing better than another, you may want to increase your contributions to that account. As long as you stay within the contribution limits for each account type, this is an easy way to maximize returns.

Knowing When to Rebalance Your Portfolio

Rebalancing is the process of readjusting your portfolio allocations in order to maintain a desired mix of assets based on risk tolerance or other factors. Rebalancing should be done periodically in order to ensure that your portfolio remains aligned with your financial goals. You should also consider rebalancing whenever there is a major shift in market conditions.

When rebalancing a portfolio, it’s important to consider factors such as risk tolerance, asset allocation goals, and taxes. It’s also important to consider how much time and effort you want to put into managing your portfolio. If you don’t have the time or inclination to rebalance regularly yourself, there are many tools available such as robo advisors that can help automate this process.

Monitoring Your Investment Performance

Once you’ve set up automated savings and investments accounts and chosen the right investments for them, it’s important to monitor their performance over time in order to ensure that they are meeting your goals. Monitoring investment performance includes tracking returns on individual investments as well as tracking overall portfolio performance.

It’s also important to monitor any news related to individual investments or markets in order to stay informed about any changes that could affect returns or risk levels. Finally, it’s important to review any fees associated with investments in order to ensure that they are reasonable.

Automating savings and investments allows you to take the stress out of saving and investing by ensuring that your funds are invested in the right places for maximum returns. By understanding the different types of accounts available, setting up automated transfers into them, finding the right investment platforms, taking advantage of tax benefits, making adjustments when necessary, knowing when to rebalance your portfolio, and monitoring performance over time, you can ensure that your investments meet your financial goals.