Roundup the Change
This idea should be somewhat familiar to you – Bank of America actually has a “Keep the Change” program. How this works is that for every one of your expenses, you roundup the expense to the nearest dollar. The difference between that amount and the actual cost of the expense is what you save. So let’s say, you have an expense that’s $4.75. You roundup to $5, and then save the 25 cents.
There are a couple of ways to do this. Obviously, if you use Bank of America, you can sign up for their service. This is very easy if you spend cash – just set your change aside. You can also keep a spreadsheet of your expenses, or as you spend, just manually transfer money into your savings account.
Before the days of electronic banking, when you had to write into your check register when you wrote a check or used a debit card, a lot of people used the Roundup Rule when recording their transactions just because it makes the math easier. It’s much easier to add round numbers than fiddle with the change. Then, when their bank statements would come, they would reconcile their accounts and naturally have more in their account than their check register indicated. They would then transfer that difference to their savings account. Easy peasy!
Using the Roundup Rule to roundup your change is a simple and painless way to save money – but along with that pain-free status comes very slow savings. You won’t be saving hundreds of dollars unless you are performing a lot of transactions each month.
Roundup to the nearest $5
Similar to rounding up your change, you can use the Roundup Rule to roundup your expenses to the nearest five dollars. So if your expense is $13.25, you roundup to $15, and then you save $1.75. This can be a great way to increase your savings, but you may be more likely to feel the impact of that change.
Choose your own amount
Of course, you can also roundup to whatever amount you so choose. I know some people who only carry $20 bills for their spending, so every time they come back from a day of shopping, everything left in their wallet that isn’t a $20 goes straight into a savings jar. That’s a really impressive amount to save, but you will certainly feel that amount of savings. So the Roundup Rule is really about what works best for you.
And don’t forget – you can change the rule to find out what works best for you. Start out by saving the change, then try rounding up to a bigger amount.
Can You Use an App?
Yes! There are a number of apps out there that help you use the Roundup Rule. Forbes has a great list that you can check out. Of course, these all require you to give access to your banking information, so your comfort level will vary.
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Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.