Our next #WaysToSave blog post presents a really simple rule for saving simply by rounding up your transactions. This simple tactic works really to help you save little and often or if you don’t have a specific savings goal in mind.
There are lots of different ways (and even tools, thanks to some trusty fintechs) that you can use round up to help you save money, these include:
- Rounding up your transactions to the nearest pound or transferring a set amount (say £1) into savings for each transaction you make. This is sometimes known as micro saving. Put simply this means that if you bought a coffee for £2.50, you’d round up the transaction to £3 and transfer 50p over to savings account.
- Rounding down your account the day before pay day to £0. This sees you each month on pay day (subject to there being no transactions pending) you move any money that’s surplus in your current account over to your savings account. For example, if your salary comes in at £1,500 and your balance goes up to £1,800, move £300 to your savings account.
Saving by rounding up your transactions is a pretty fiddly process, but luckily help is on hand. Many banks (more so challenger banks like Revolut‘s “Vault” Feature, Starling and Monzo) have incorporated this feature into their mobile apps as a feature that you can switch on.
In addition to banks, the rise of open banking has seen a number of apps launch that offer this feature also but allow you to invest your savings within more “interesting” products such as investments, currencies, cryptos and even gold. Examples include Chip, Moneybox and Plum etc. but haven’t used them personally so can’t recommend.
Once you’ve switched it on, you can just sit back, spend as you would do normally and you’d naturally find that you save. Well…from my own personal experience, whilst its a great way to save, you might find that you don’t save a lot each month. I’ve found that by rounding up i was saving around £25 a month, based on making around 50 transactions a month.
Compared, if you find that you have money to spare at the end of each month, rounding down is a great way to save more significant amounts. I’ve not come across a tool that does this automatically, a really good friend of mine told me about it. If this is something you’d like to do, set yourself a reminder in your phone that repeats on payday and manually do the transfer once you’ve been paid.
You will find that some months you’ll save more than others, depending on the time of year, but over the course of the year that this method is quite fruitful for saving. Also if you are constantly coming to the end of each month and the amount remaining isn’t as great as you’d like, its a good discipline to look at your transactions and see what impulse spending you can cut back on.
Quo Money has been designed for making the process of rounding up and down your transactions as seamless as possible. We reward users for planning ahead and building a financial safety net so that when the unexpected occurs e.g. your car’s in the garage, you are ready to pick up the bill.
Quo Money also in helping you plan ahead will show you if you are saving too much and are likely to hit your overdraft and incur charges – when rounding you have to be extra diligent with how you manage your finances to ensure you’ve got funds available to meet your monthly commitments.