In July 2002, I opened an account at ING Direct and created a scheduled transaction. Every two weeks, when my day job paycheck was deposited, a portion of this money was automatically passed through directly into my new Emergency Fund.
A few months earlier, I became eligible for investing in my company’s 401(k). This is an automatic investment. I started off with the minimum investment necessary to take full advantage of the employer matching benefit. Now many companies enroll employees in the 401(k) automatically.
Since then, the details including amounts and accounts have changed, but I never see a good chunk of my paycheck.
The idea of making saving automatic is Fortune Magazine’s sixth rule for building wealth. Here’s what the magazine has to say:
No one wants to think about saving — so don’t. Already more companies are making 401(k) enrollment automatic… If you’re already maxing out your 401(k), see whether your company can transfer money directly from your paycheck into your Roth IRA or a taxable account. Or ask if your bank can transfer a set amount (even $100 a month) from your checking account into a high-interest-bearing online savings account…
David Bach is an author who highly encourages making saving automatic; in fact, he’s written a book that describes how doing so can make anyone a millionaire over time, The Automatic Millionaire.
Updated June 16, 2011 and originally published December 18, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.