Making the most of your rounding-up saver app
Canny savers used to have a jar for their loose change and when they came home from grocery shopping, they’d plunk the leftover coins into that jar, ready for a rainy day, a new pair of shoes, or a holiday.
This habit is one that tech has only just caught up with, it seems. It’s only in the last few years that finance platforms have developed the facilities to round up transactions to the nearest dollar and stash the change away.
How do roundup apps work?
You can link an app, such as Raiz or Spaceship, to your transaction account. When you use your debit card to make a purchase, the app “sweeps” the loose change into a saver account without you actually feeling anything. For example, if you buy a coffee for $3.50, your saver app will round the purchase up to $4 and move the spare 50 cents into your savings.
That 50 cents might not seem like much, but if you buy at least one coffee a day, five days a week, and make lots of other purchases as well, those savings will accumulate surprisingly quickly. If there’s an interest rate applied to that “pot”, then that’s even better.
The types of saver apps
You have your bank’s own saver programmes which round up purchases from your transaction account and move the money into a savings account. Very often, however, you’ll need to opt in to this function.
Then there’s saver apps, which can move the money to different pots or purposes, not just a saver account. You can funnel your loose change into an investment portfolio if you use Raiz, or you can send it to chip away at your student debt.
You need to think about which sort of app is best for you
Each app has a different purpose. Raiz links to your transaction account and invests your loose change in exchange–traded funds while Revolut sweeps any loose change left after a purchase into one of its vaults. You set up and name your vaults and just recently these vaults started earning 0.80 per cent p.a. in interest.
Think about what you’re saving
You might just be trying to stash some cash away for a holiday or an emergency fund, in which case a simple account–linked repository for your loose change will suffice. If you’re looking to invest the loose change or to pare your expenses down, then a specialist saver app might be better.
Does your stash earn interest?
Some saver apps do pay interest and if you find one that suits you and does offer interest, then it could work well for you.
What about fees?
Fees will eat into your balance and your earnings, so unless you’re planning to save much more than the monthly fee, you might be better off looking for a free app.
What features do you want?
Are you more about savings or about controlling and reducing your spending? Are you looking to pay off debts faster?
Using your bank’s automatic savings function
Your usual bank may well have a programme which rounds up money from your transaction account and sweeps it into a saver. You’ll be able to opt in and out, depending on how flush you feel.
The benefits of automated savings
Automated savings apps take the effort out of stashing away cash. You can set up your targets and deductions in a matter of minutes and then leave it to run. You don’t have to remember anything.
You don’t need to be particularly disciplined – if your app is shifting a dollar here and a dollar there into your savings you won’t notice it and you won’t have to remember to do it yourself.
Your balance is constantly growing
Even if it’s just a few cents with each transaction, there’s a constant stream of money going into your savings vehicle; all without any effort on your part.
Making the most of your saver app
You need to determine what your goals are. Are you letting money trickle in at the rate you spend, which is in turn determined by how much you have in your account, or do you have a more aggressive strategy in mind?
If you’re more freewheeling, then an ad hoc trickle might work for you. On the other hand, if you have a definite target, then a manual sweep of money as well as the ad hoc trickle might be the ideal combination.
So, everything is automated and you don’t even notice the small amounts of money leaving your transaction account for your designated saver. It could be time to step up a gear.
Make additional deposits
Even if you have your loose change roundup contributions and your scheduled deposits, you can still make one–off transfers to your pot. If you have a bonus, a refund or if you’ve not spent as much as usual one week, you can move some extra money into your saver.
Make sure you review your deposits
You might be able to increase your scheduled deposits, or even start making a few if you’ve previously just relied on loose change.
If your savings app funnels money into a particular saver account, is this account offering the best interest rates? Other providers might offer a better rate or charge lower fees, so it’s worth reviewing your savers once a year or so.
Speaking of fees
Many accounts and apps don’t charge fees, especially for the basic versions, so don’t assume that you have to just put up with them.
Avoiding the risks of roundup savings
If your roundup app sends a few dollars too many to your saver, then you might find a direct debit failing. It’s important to make sure that there’s enough in your transaction account by checking the balance every few days and moving money back out of the saver if necessary.