Automate Saving and Investing: Save, Invest, Repeat

We're all looking for ways to save time and make daily life a little easier, right? Maybe that's why monthly subscriptions for things like streaming services, music, and meal plans are so popular. It puts your everyday spending on automatic, so you don't have to think about it. Well, here's an idea. Why not make your financial life easier by putting your saving and investing on automatic too? Chances are you're already doing it with a 401(k). And that's a great start. But you don't have to stop there, because there are lots of ways to automate saving—and investing too.

I'm a big fan of automatic saving and investing. I do it with my son's 529 plan, so I don't have to worry about how to pay for his education. The money automatically goes into the account every month, and is invested according to a plan I've chosen. One less thing on my mind.

I also used this automatic saving approach to save for a down payment on a home when I planned a move to Dallas for a new job. I wanted to buy a home and had about a year before I was going to move. So, I did the math. What could I afford and what did I need to add to my savings every month for a down payment? It was doable, so I put a certain amount of money automatically into a savings account. When the time came to buy, the money for the down payment was there.

It just makes sense. If you put things on automatic to spend money, consider putting your savings on automatic too. And whether your goal is to save, invest, or both—it's easy to set up. Here's how, why it works, and what to do to get started.

The key to automatic saving and investing is making regular contributions over time. You decide to transfer a certain percentage of each paycheck automatically to a savings or investment account. You can even direct your money to go to several different accounts.

Once you've set it up, you're done. Since the money never hits your checking account, you won't miss it, and you can't spend it. Basically, you've paid yourself first.

And when you see how much you've accumulated, it can be a great motivator to keep going. Consider that by saving $150 a month with a 6% annual return, in 25 years you'd have $101,936.

It could sound easy to get started with saving. But, you might have questions about investing. What should you invest in? When's the best time to invest? Putting your investments on automatic can help take the emotion out of investing through dollar-cost averaging.

Dollar-cost averaging is a method where you invest a fixed dollar amount on a regular basis—no matter what the share price is. It helps you develop a disciplined investing habit, saving you time, and potentially lowering your stress level—as well as your average cost per share.

Here's how it could work. Let's say you decide to invest $100 every month automatically. When the market is up, your $100 will buy fewer shares, but when the market is down, your money will buy more. This can lower your average cost per share over time. For example, if you choose a stock that's $5 a share and the first month you buy 20 shares. The next month the stock drops to $4 so you buy 25 shares. Month three it drops to $2 giving you 50 shares. You've invested $300 and now have 95 shares. Your average share price is $3.15. Say the price goes back up to $5 a share. Now your investment is worth $475.

And the cool thing is, you can set it up all in one process. You choose the account, the amount, and the investment, then sit back and relax. Instead of reacting to market ups and downs—and potentially buying high and selling low—you stay steady and consistent, and maybe even increase your returns.

As I said, you may already be investing automatically in a 401(k) or other employer-sponsored retirement plan. If you aren't, now's the time. Choose a percentage of your salary to be transferred to your retirement account (10% to 15% is a good start) and the types of investments you want. The money will be taken automatically from your paycheck, deposited into your employer sponsored retirement plan, and invested as you choose. But that's not the only way to start saving and investing automatically. Here are other ideas to consider:

• Set up Automated Clearing House (ACH) transfers from your checking account to a savings account for an emergency fund.
• Your employer may offer the ability to set up a direct deposit from your paycheck into multiple accounts such as a savings or investment account.
• If your employer offers a Health Savings Account (HSA), and you qualify, you can automatically contribute from your paycheck to that account, up to the annual limit.
• Open a 529 college savings plan for yourself or a dependent, and set up automatic contributions and investments.
• Set up ACH transfers from your checking account to an investment account or Roth IRA (if you're eligible to contribute to it).

Often you can open the account, fund it, and choose your investments at the same time. If you're not sure which types of investments to consider, check out free investing education resources at SchwabMoneywise.com. Plus, once you open and fund an account, it's flexible. If you want to invest more, just increase your monthly deposit. If you want to invest differently as you learn more, you can.

I like to think of automatic saving and investing as setting up a monthly subscription. It's an easy way to systematically work toward your financial goals, whatever they may be. You put it in motion, and it just keeps on going.

And just as you periodically check your spending subscriptions, check in on your savings and investments. It's a lot more rewarding to see how much your money has grown than how much you've spent. Chances are you'll be happy with what you see—and maybe decide to save and invest even more.