Round ups are a feature offered by some financial services companies that capture the spare change from each of your purchases and deposit that change into your savings or investment account.
Most advisors recommend setting aside a predetermined portion of your income each month to be put towards your future. While this is certainly a sound strategy, round-ups can be a great way to catapult your savings even further.
Keep reading to learn all about round-ups and how round-up investing works.
How do round ups work?
Round-up apps or extensions are typically linked to your existing card as well as a pre-selected bank account.
Say you’re purchasing a cup of coffee for $5.25. If you were using cash or just a regular debit card or credit card, you’d have 75 cents remaining in change from that transaction.
Round-ups automatically collect that 75 cents and deposit it into a designated savings or investment account. In other words, your purchase is ‘rounded up’ to the nearest dollar and the difference is set aside as savings. It’s an incredibly easy way to save since you don’t really have to think about the money!
Many people would be quick to disregard cents as mere loose change. However, over time they can add up to considerable savings. Consider someone who goes to cash out a coin bank, only to walk away with $50 or even $100. Round-up investing is essentially an upgraded version of the same thing.
Round up savings app benefits
Round up savings apps make it easy to save and improve your finances. Whether you’re new to investing or a seasoned saver, they can be a great addition to an overall financial strategy.
Take a look at the top benefits of round-ups.
Low minimums
It’s easy for beginners or students to feel discouraged from investing, especially if they don’t have a ton of savings to begin with. The beauty of round-ups is that these programs allow you to start with literal pennies. It may not amount to much in a month or two, but as you continue to make use of round up investing you could be hundreds if not thousands of dollars ahead over the years.
Automatic savings
Budgeting and savings are incredibly important components of financial health. That said, they can often feel like you’re making a sacrifice between what you want now and taking care of your future self.
Round-ups take much of that stress off of saving since you don’t need to conscientiously set aside money. When savings are automatic, they’re able to sort of build up in the background. In fact, many personal financial advisors recommend automating various aspects of your personal finances, from bills to more mainstream saving deposits.
Complements an existing strategy
Round-ups can be a great way for beginners to get in on investing and saving. But they’re also a great complement to an existing financial strategy. Even if you’ve been following a savings plan for years, round-ups work behind the scenes to enhance your savings even more.
How to use round ups for saving and investing
One thing about saving and investing is that results are almost never ever seen overnight. It takes patience and consistency to build your financial nest. It will be hard work, but if you’re willing to stick it out over the long haul you’re bound to see results. With rounds up investing especially, the difference is really made over months, if not years.
Round ups are only one part of a financial or investment strategy. In other words, you shouldn’t neglect your mainstream saving or investing strategy. Think of round ups as a bonus, but that doesn’t mean you should rely on them for all your financial future needs.
It’s important to continue to follow best budgeting practices and you should still strive to save a set, larger amount each month for retirement or an emergency fund.
Best round up investment apps
Round ups can be offered as an individual round up investment app, or as a feature on your existing finance app. Some people may decide to opt for a different company to manage their roundup investments altogether, while others may want to stick with their original bank.
Whichever route you choose, consider these factors for choosing the best round-up investment app.
Low fees
Many financial companies or investment accounts charge fees. Ideally, you want to work with a partner that comes with little to no fees. It’s also important that they’re transparent about any and all fees that they charge. Make sure to read the fine print before opening an account and if you don’t understand the numbers, it may not be the best fit.
Seamless integration
Most round up features come with a seamless connection to your existing brokerage or savings account. But it’s not always a given. You don’t want your extra cash to sit in a separate account that’s difficult to access. Make sure to double-check that the round-ups feature you’re using automatically deposits your change into a set savings account.
Ease of use
Your round up savings may not be as impactful as your mainstream accounts, but that doesn’t mean you wouldn’t benefit from a clean, easy-to-use interface. You want an app that offers simplified navigation and that allows you to review how your savings are building over time.
Final thoughts
Round up purchases can offer a robust boost to your current financial planning strategy. They’re automatic and don’t require you to consciously set aside income. Plus, round up investment apps are generally simple to use and get started with.
Consider MoneyLion’s Round Ups feature that allows you to earn Bitcoin or deposit your additional change to an investment account. With just a couple of clicks, you could link your use of your existing debit or credit card to collect additional savings on every purchase.
Learn more here.
FAQs
Can you round up credit card purchases?
Yes! Most round-up apps and features link to your existing debt or credit card.
What is a round up transfer?
Round up transfers typically happen at the end of the day, when the additional change from all your purchases is moved into your set bank or investment account.
How does round up savings work?
When you make a purchase with a debit card or credit card, the transaction is rounded up to the nearest dollar and the additional amount is then transferred to a preselected bank or investment account.
