Put your savings on autopilot

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AUTOMATIC or manual? In the motoring world, automatic is the popular winner, and it’s a theme worth following for investors.

Making saving and investing automatic is the simplest way to build wealth over the long term, experts say. Having to remind yourself to put money away every week or month is setting you up to forget, and fail.

Richard Livingston, founder on online financial advice service Eviser, says it is simple to set up automatic deposits into a savings account, or regular monthly contributions to managed funds or superannuation.

A key to being successful at saving and investing is getting a good routine going. Like fitness, he says.

If you dont make it routine, it is too easy to put it off until tomorrow, or next month.

Livingston says the impact of missing deposits can be extreme over long periods of time.

Heard Financial CEO Nicholas Heard said we are used to making regular repayments on loans, and investing should be no different.

You create a discipline for yourself and over time, this discipline should translate into a handy sum of money, he says.

If you set the direct debit up around the same time as your pay hits your account, it gets taken before youve had a chance to spend it on something else. So, if it is not seen, it is not missed.

Workers have money automatically going into their nest egg through compulsory super contributions from employers, but this is not usually enough to deliver the future lifestyle most people want. Heard says salary sacrificing extra money into super has great tax and savings advantages.

Your employer can automatically deduct the extra contribution from your gross wages and redirect it into your super fund on your behalf, he says.

Ideally, you should look to try and save or invest 10 to 15 per cent of your salary each year if possible.

Heard says if you can generate an investment return of around 7 per cent a year, you should double your money in about 10 years.

Given an initial deposit of $2000 with further contributions of $100 per month for 10 years, your invested capital will amount to $14,000, and you then might expect that the total investment should be worth approximately $21,300 at maturity.