What is a savings plan?

The term ‘savings plan’ really just means what you are going to do to set money aside. In most cases a savings plan will fall into two main categories.

General savings plan:

This is usually a plan you put together yourself to reach financial goals.

A general plan will include budgeting and savings steps. Setting money aside over the short-term will improve your financial health in the long-term.

Some steps might include:

1. Having a clear financial goal(s) and adding cash to it at regular intervals
2. Budgeting and identifying any non-essential spending that you could cut out. Money saved can go towards your savings goals
3. Having a clear objective. This could mean saving a certain amount by a particular date.

Automatic savings plan:

This type of plan is usually an investment product provided by a bank.

Investopedia describes an automatic savings plan as: “A system in which the plan contributor automatically deposits a fixed amount of funds at specified intervals into their account.”

An advantage to investing your savings is the interest you can earn, which helps you make the most of your money. To make this easier to achieve, some banks provide automatic savings plans (which are often confusingly called “savings plans”).

Your financial advisor can help you decide whether an automatic savings plan is the right option based on your personal financial situation.

When to start a savings plan

The sooner the better.

Remember, the great thing about a savings plan is that it fits around you and your financial situation. Whether you start small or save large amounts, the sooner you start the more time your money has to grow.