A pre-authorized contribution (PAC) plan withdraws a pre-selected amount of money from one of your accounts and deposits it your investments or savings account on a regular basis. Sometimes known as an automated savings plan, a PAC helps you earn more interest on your money and grow your savings faster – without any work on your part!
Planning a PAC is simple:
- Decide how often you want to make a contribution (weekly, bi-weekly, monthly, etc.)
- Choose the amount of money you want to contribute
That’s it! Now you’re ready to set up a PAC plan and enjoy all the benefits that come with it.
5 great reasons to set up a PAC plan
1. Reach your savings goals faster
PACs help you plan out your savings because you’ll know how much you’re contributing, and when. That makes it easy to calculate how long it will take you to reach your savings goal. For an example, do the math with our Savings Goal Calculator.
Plus, PACs help your savings grow faster. When you contribute regularly, even if it’s just a little at a time, you’ll earn compound interest throughout the year (this means that you earn interest on your initial deposit and on the interest you’ve earned).
2. Stress-free saving
With a PAC plan you save automatically, without even thinking about it. Believe it or not, this can have big mental health benefits! Money is a major source of stress for a lot of us, so having a plan in place to make automatic progress on your financial goals can help with your confidence and security.
Plus, you can use a PAC plan to contribute to your RRSP and TFSA. This means you won’t have to worry about coming up with a lump sum payment before the RRSP contribution deadline and you can use the PAC to meet your TFSA contribution limit faster.
3. Take control
Setting up a PAC plan is a fantastic way to stick to a budget. Ever heard the saying “pay yourself first”? It means that before you spend on things that may be non-essentials, you pay some to yourself by adding it to your savings. That way, you earn interest that you can can allocate to future plans or unexpected expenses. By transferring money to your savings or investments automatically, a PAC plan helps you resist spending that cash on something you might not really need.
Also, with a PAC you’re not locked-in to any kind of commitment and can change your PAC settings any time. This means you can start small and increase your PAC when you’re able or decrease it when money’s tight.
4. Earn more with an early start
The longer you wait to start contributing to your investments and savings, the more you’ll need to add later to catch up to your goals. Waiting also means you’ll lose out on earning more interest. That’s why some people call this the “cost of waiting.” Think of it this way: if you started contributing $100 each month when you’re 30, you would save almost twice as much as you would if you started contributing $100 each month when you’re 40.
5. Lower your investment costs
Setting up a PAC plan can help you lower your investment costs through dollar cost averaging. Investing fixed, regular amounts into the same stocks*, mutual funds* or ETFs*, is a strategic way to weather any ups and downs in the market.
Get started
It just takes a few minutes to set up a PAC in Meridian Online Banking.
Learn how to set up a PAC online
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A great way to start saving
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A great way to start investing
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If you’re interested in managing your own investment portfolio with an easy-to-use online platform, check out Qtrade Direct Investing*
Learn more about saving
Six ways to add money to your RRSP
A version of this article was originally published December 14, 2020.
*Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. Online brokerage services are offered through Qtrade Direct Investing. Qtrade Direct Investing and Qtrade Guided Portfolios are divisions of Aviso Financial Inc.