Automatic investment plans make saving easier

— -- The nation's savings rate soared to 4.5% in June, according to the Bureau of Economic Analysis, which can mean only one thing: We have been invaded by Venusian Brain Garglers and now live to serve our alien overlords.

Of course, it may also mean that people are worried about the economy and are paying down debts and setting aside cash for a rainy day. Economists prefer the latter explanation. For whatever reason, if you're thinking about starting a savings plan, consider an automatic investment plan.

The USA — once the home of the most profligate spenders in the galaxy — seems to be becoming a nation of savers again. The savings rate had fallen below zero in 2006, the lowest since the Great Depression.

Is this a long-term trend, or simply a reaction to current events? "I hope there's some permanent change," says Eleanor Blayney, consumer advocate for the Certified Financial Planner Board of Standards. "It's too early to tell." A recent survey by the organization, however, shows that 53% of all consumers list "managing/reducing current debt" as a major financial-planning issue. An additional 47% list "building an emergency fund" as a priority.

Saving money, like losing weight, is something that often sounds easier than it is. Car repairs and blown water mains will devour a savings account.

It's best if your savings never hits your bank account, which is why a 401(k) is a good solution. Two other reasons to fund your 401(k):

•Uncle Sam makes it easier to save. Let's say you're in the 25% tax bracket. If you want to save $100, you have to earn $133 before taxes. Because your 401(k) contributions are before taxes, however, your $100 goes straight to savings.

•Company contributions turbocharge your savings. If your company matches 50 cents on the dollar, you've got a 50% gain, which wipes away many investment sins.

The drawback to a 401(k), however, is that you will generally face steep tax penalties if you withdraw money before age 59½. You may want a savings account that's a bit more accessible in an emergency — or, if you're young, by middle age.

An automatic investment plan is a great solution. Most fund companies want $2,000 to $3,000 for an initial investment. If you start an AIP, however, you can get into some great funds for $100 or less.

An AIP is fairly simple. When you open your AIP, you agree to let your fund tap your bank account once a month for a set amount. In most cases, you can determine what day that occurs, too.

The six funds in the chart will let you start an AIP for $100 or less. Which fund should you choose? It depends on when you might want to tap your savings — and how much risk you want.

•Hussman Strategic Total Return hstrx. This fund aims to beat inflation by 2 percentage points a year — a low bar recently, because the government's consumer price index has fallen 1.5% the past 12 months. The fund had 35.7% of its assets in cash, or money market securities, at the end of June and 54% in bonds, with just 10% in stocks.

•Schwab GNMA swgsx. The fund invests in mortgage-backed securities, but not the kind that brought so many investment houses low. These mortgage-backed securities are backed by the U.S. Treasury and typically pay a few percentage points more than 10-year Treasury notes.

•Dreyfus Small-Company Value dscvx. Arguably the riskiest fund, it can also have periods of monster performance. Its best 12-month performance: a 115% gain, Morningstar says. Worst: a 47% loss.

•T. Rowe Price Capital Appreciation prwcx. A cautious large-company stock fund. It has about 61% in stocks and 18% in bonds.

•Buffalo Balanced bufbx. Like most balanced funds, Buffalo Balanced has a mix of stocks and bonds. The fund has outperformed 90% of its peers.

•Artisan International artix. Manager Mark Yockey looks for foreign stocks that have been clobbered and could be ripe for a rebound. It's a risky fund but a good choice if you want international stocks.

Even if your brain is controlled by aliens, saving money isn't easy. It's best to take your mind out of the picture entirely and put your savings on autopilot. AIPs are one of the best ways to do just that.

John Waggoner is a personal finance columnist for USA TODAY. His Investing column appears Fridays. His book,Bailout: What the Rescue of Bear Stearns and the Credit Crisis Mean for Your Investments, is available through John Wiley & Sons. Click here for an index of Investing columns. His e-mail is jwaggoner@usatoday.com. Twitter: www.twitter.com/johnwaggoner.