We released Autopilot earlier this fall because we want to make managing your finances easier. Autopilot is available to all Wealthfront clients, and it’s an easy way to get more out of your financial accounts and ensure your money is working hard for you. Best of all, it’s completely free.
Just tell Autopilot how much you want to keep in cash, and it will automatically save or invest the rest. You can use Autopilot to move money from an external checking account or your Wealthfront Cash Account to the Wealthfront account of your choosing (we recommend a taxable Investment Account). You can think of Autopilot as your financial assistant that takes care of the details so you can focus on the big picture. For more information on setting up Autopilot, check out the details here.
Not sure if Autopilot is for you? Here are six reasons you should use it to automate your savings strategy.
1. Save time managing your money
We surveyed our clients and learned that many of them spend two hours or more per week managing their finances. That adds up to more than 100 hours a year, with much of it likely spent on mind-numbing manual tasks like checking account balances and initiating transfers. When you use Autopilot, you can delegate those annoying tasks and feel confident that Autopilot is doing exactly what you want it to — automatically.
2. Get in the market sooner
Maybe you’ve heard the popular saying that time in the market is more important than timing the market. Autopilot, combined with the Wealthfront Cash Account, can help you invest your paycheck sooner and get more days in the market.
When you direct deposit your paycheck to your Cash Account, you could get paid up to two days early. And when that happens, Autopilot will detect any excess cash and automatically schedule a transfer to your Investment Account. As a result, Autopilot can transfer funds into your Investment Account before you otherwise would have even received your paycheck. Over time, those extra days can really add up, and you could get an additional 50 days in the market each year.
3. Avoid cash drag
Cash drag is a drag, and it’s all too common. If you’re keeping cash in any kind of checking or savings account right now, it’s likely not keeping up with inflation. As a result, your cash is losing buying power — which defeats the purpose of saving in the first place. That’s why you’re better off using a taxable investment account like the one we offer to build long-term wealth.
When you use Autopilot, you can rest easy knowing all of your excess cash is getting put to work automatically. Just tell Autopilot how much you want to keep in cash, and it will handle the rest.
4. Give your recurring transfers a boost
Some diligent savers use recurring transfers to ensure they’re investing a set amount of money each month. But recurring transfers aren’t sensitive to changes in your spending over time, meaning sometimes you’ll have extra cash left over in your account even after the transfer goes through. Autopilot can help with this and transfer any extra cash on top of your existing recurring transfers. Think of it as giving your savings a bonus.
Plus, unlike recurring transfers, Autopilot is smart enough to help you avoid overdrafting your account. Autopilot will cancel a transfer if you’ve made a large purchase or expenditure and are no longer over your maximum balance by at least $100.
5. Manage your monthly spending
Are you tempted to spend any excess cash that’s sitting in your account? When you set the right maximum balance with Autopilot, you don’t have to worry about that because Autopilot will automatically move excess cash for you (giving you less time to think about spending it). Just like a 401(k) takes money right out of your paycheck to ensure you do the right thing for your financial future, Autopilot moves excess cash before it can burn a hole in your pocket.
To pick your maximum balance, we suggest you add up any bills or expenses paid out of the account over the last several months to determine, on average, how much money typically leaves the account in a given month. That number is a good starting point for your maximum balance. You can always adjust it down the road.
6. Stop worrying about when to invest
Many people worry about picking the “right time” to invest and end up procrastinating as a result. In reality, there is no “right time” because financial markets are extremely unpredictable in the short term. When you let Autopilot put your money to work whenever there’s excess cash, you don’t have to think about timing the market. Instead, you can relax knowing that Autopilot will invest excess cash soon after it hits your account.
Let Autopilot do it
Autopilot is a major step toward our vision of Self-Driving Money™, where we’ll be able to optimize every dollar you earn in the most appropriate way for your lifestyle and goals. When you use Autopilot, you can get back the time you’d otherwise spend on mundane money management tasks. You can also enjoy the peace of mind that comes with knowing your excess cash is being put to work automatically.
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Cash Account and Autopilot are offered by Wealthfront Brokerage LLC (“Wealthfront Brokerage”), a member of FINRA/SIPC. Neither Wealthfront Brokerage nor any of its affiliates are a bank, and Cash Account is not a checking or savings account. We convey funds to institutions accepting and maintaining deposits. Investment management and advisory services are provided by Wealthfront Advisers LLC (“Wealthfront Advisers”), an SEC registered investment adviser, and financial planning tools are provided by Wealthfront Software LLC (“Wealthfront”).
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About the author(s)
The Wealthfront Team believes everyone deserves access to sophisticated financial advice. The team includes Certified Financial Planners (CFPs), Chartered Financial Analysts (CFAs), a Certified Public Accountant (CPA), and individuals with Series 7 and Series 66 registrations from FINRA. Collectively, the Wealthfront Team has decades of experience helping people build secure and rewarding financial lives. View all posts by The Wealthfront Team