A pre-authorized contribution (PAC) plan transfers a pre-selected amount of money from one of your accounts and adds it to your investments or savings account on a regular basis. Sometimes known as an automated savings plan, this helps you earn more interest on your money and grow your savings faster - without any work on your part!
Decide how often you want to add your contributions (weekly, bi-weekly, monthly, etc.)
Choose the amount of money you want to contribute at this interval
That’s it! That’s all you need 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. You know how much you’re contributing, and when, so it’s easy to calculate how long it will take you to reach your savings goal. Do the math with our Savings 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 has 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. You won’t have to worry about coming up with a lump sum payment before the RRSP contribution deadline, or you can use it 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 lots of money on non-essentials, you pay some to yourself by adding it to your savings. That way, you earn interest on money that you can use for your 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 don’t really need.
Also, you’re not locked-in to any kind of commitment - you can change your PAC settings any time. This means you can start small and increase your PAC later if it’s in your budget, or decrease your PAC if 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 have to add later in order to catch up to your goals - plus you 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.
It just takes a few minutes to set up a PAC in Meridian Online Banking.
Not sure how well you're saving? See how you measure up by getting your Financial Resilience Score.
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*Mutual funds are offered through Credential Asset Management Inc. Online brokerage services are offered through Qtrade Investor. Mutual funds and other securities are offered through Credential Securities. Qtrade Investor and Credential Securities are divisions of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc.