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Put Your Savings in Hyperdrive, Part 2: Keep Your Change

This article was written by in Saving. 11 comments.


Whether you’re trying to establish an emergency fund or putting money away to take your dream vacation, you can reach your goal faster by putting your savings in hyperdrive. Unfortunately, scientists have not yet perfected time travel. When they do, saving for retirement might only entail traveling back to the 18th century to deposit $1,000 in a national bank and popping back to the present to reap the rewards of three hundred years of accumulated interest.

Until modern technology catches up to science fiction, savers are relegated to more traditional forms of accelerating their income from interest. Yesterday, I wrote about opening a high-yield savings account, a set-it-and-forget-it task. The next suggestion involves creating a daily habit.

2. Keep your change. At first glance, focusing on your daily pocket change may seem like a lot of effort with too little payoff. For example, I’ve seen people who are so focused on picking up pennies from the ground by keeping their eyes down that they miss the dollar bills right in front of their faces. That’s a prime example of being penny wise, pound foolish.

Nevertheless, I’ve also seen coin jars add significantly to savings. A coworker of mine emptied her jar recently and counted $500 from the past year. This type of savings may not be worthy of your retirement plan, but it can mean the difference between renting an economy car and a convertible on vacation. A mason jar may not support your children’s education, but it might pay for internet service for a year so your kids can research their assignments online. This is significant, and the beauty is in the simplicity.

The concept is simple, but the execution is not as easy as it used to be. Back when dimes were 90% silver, cash was king. Almost all everyday transactions were handled with cash. Inflation from the last 50 years hadn’t yet eroded the value of coinage, so when you dropped your coins in a jar at the end of the day, you knew it was worthwhile.

Now, fewer transactions are handled by cash, and you have less change in your pocket when you arrive home. The change you do have has decreasing purchasing value, as well. Keeping your change in the 21st century now takes more than filling a piggy bank with your coins.

That’s not to be overlooked however. The only material needed is a jar or piggy bank, and the best placement is near your front door, perhaps right next to the spot where you leave your keys when you walk in at the end of the day. It’s quite simple to make this a habit: check your pocket or purse as you put down your keys or hang up your coat. Perhaps you won’t have anything most of the time, but it’s a habit worth creating anyway.

Once a month, or more frequently if you desire, bring the coins in the jar to your bank to deposit into your savings. If your bank has a free change counting machine this process may be easier. My girlfriend enjoys rolling coins into wraps so I don’t deny her the fun. Don’t forget that this deposited accumulated change will do much more for you in a high-yield savings account than in the standard account offered by your local bank.

Unfortunately, with the decreasing use of cash, the “analog” coin jar may not be enough. In a world where debit cards and credit cards rule financial transactions, a high-tech piggy bank equivalent may make the difference. One example was corporate-sponsored. A few years ago, Bank of America created the “Keep the Change” account offering.

Every purchase you make with the debit card is rounded up to the nearest whole dollar. When the debit card is used to make a purchase, the amount deducted from your checking account is the rounded up number. For example, if at item is purchased for $15.25, $16.00 is deducted from the account.

Of that $16.00, the difference due to rounding, $0.75, is transferred directly into your Bank of America savings account, where presumably it will earn some interest. Of the remaining $15.25, Bank of America keeps about $0.25, a standard merchant transaction fee, and the merchant receives the remaining amount, approximately $15.00.

Similarly, One from American Express is a credit card that will deposit 1% of your purchases (plus a $50 bonus after your first purchase) into a high-yield savings account.

There’s no reason for this type of cumulative saving to be tied to certain debit cards, debit cards, bank accounts. While they make it easy for you, it would be worthwhile to use all of your credit and debit card accounts as well as a better-paying savings account.

If you’re ready to put your savings in hyperdrive, then you must already track your account balances and activity in software like Microsoft Money, Quicken, or any number of web-based offerings. You’ve also presumably followed yesterday’s suggestion of opening a high-yield savings account. On a weekly basis, take a look at all your debit card and credit card transactions. Round each expenditure up to the nearest dollar. Total the excess amounts and transfer the sum from your checking account to a special high-yield savings account earmarked for whichever goal on which you happen to be focusing.

This process may be too involved for daily attention. If you review your financial activity every few days, keep a spreadsheet going with the tally and transfer the sum of the remainders to your high-yield savings once a week or once a month. The idea is to create a habit at a rate that works best for you, and everyone has different preferences.

Do what’s best for you, but don’t ignore the power of doing more with your change — and letting your extra change do more for you.

Image credit: sciondriver

Updated March 28, 2010 and originally published January 15, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 11 comments… read them below or add one }

avatar Brian

What you didn’t mention is that for the first three months, BofA matches 100% of what you save through Keep-the-Change, and 5% every month thereafter. The only stipulation is that they don’t cut you a check until the 1-yr anniversary of you joining the program, and your checking and savings account must be in good standing at the end of the 12 months (e.g. positive balance).

So, this July BofA will cut me a check for around $35, which is 100% of what I saved Jul-Aug, and then whatever 5% is of the other 9 months. Free money? Sounds great to me, and since I already had a checking and savings account with them it was totally painless. And nobody says that their (admittedly low-rate) savings account has to be your only one…

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avatar ChristianPF

@Brian
I didn’t know that – I had heard about the BOA deal, but had not heard those details… That makes it a bit more enticing, and helps out BOA by locking customers in for at least a year… Interesting…

And for the cash-handlers, Flexo, you are right – it really does add up… I love getting $100 or so, every time I take the jar in… although it isn’t, it SEEMS like free money…

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avatar Toby

For those that live in D.C. – Chevy Chase Bank offers free change counting machines at nearly every branch – and you don’t need to be a member to use it. Just give the receipt to the teller, and s/he’ll give you cash if you don’t have an account with them.

No sense in using those absurd Coinstar machines, which knock off nearly 10% of your change as a service charge!

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avatar Luke Landes ♦127,470 (Platinum)

Brian: BOA’s matching program is a good deal, particularly at 100% for the first free months. The idea here is that you must not fall into the account’s traps, like fees for your checking account or minimum balance requirements.

Toby: Commerce Bank in my area offers the same free service as your Chevy Chase Bank. A few years ago, I was told I had to be a customer of the bank to use it — I don’t know if that’s still true, or if it was never true and a particular teller just didn’t like me for some reason.

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avatar Enough Wealth

I’ve never understood the logic of the “save the loose change” concept. Any change I have in my wallet accumulates until I will eventually pay for something with a collection of coins rather than break a new note. If I kept putting loose change in a jam jar I’d be spending more notes instead, so at the end of the year the extra money in the jam jar would be exactly the amount of extra notes I’d had to take out of the ATM during the year…

In fact, not getting interest on the coins in the jam jar until I eventually put it in the bank would cost me interest on the extra cash I’d had to withdraw during the year.

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avatar Luke Landes ♦127,470 (Platinum)

EW: That’s a good observation. Logic does not always play a part when money is involved. Your assumption is that you have no leakage in your cash spending. That may be true for you, and if so, it’s a good thing but not common.

Placing the coins in a physical or metaphorical jar keeps the money out of sight so it can be directed towards long-term savings goals — goals you may not be saving for otherwise. No, it’s not earning interest in the jar, but it’s not being spent either.

One may simply withdraw more cash to keep the level of spending the same, or one may not. There’s no “one size fits all” approach to advice. This may not work for you, but it may work for others, encouraging new saving.

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avatar DebtKid

I signed up for the “keep the change” program at my bank (bank of america). It rounds all my check card purchases to a dollar amount.

It’s not the fastest way to save, but I think I’m up to like $60 now in my savings account. Once it hits $100, I’ll transfer it to my online emigrant direct account.

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avatar chosha

I used to save my coins in a jar, but can no longer do that. In public pay car parks here you can buy and display a monthly pass, but because my workplace has a private car park I don’t have that option, which means I need to come up with $5 in coins every workday.

My dad used to save 50c coins, but Australia also has $1 and $2 coins. Last year he started saving his $2 coins instead, and when the jar was full he was stunned to realise he’d saved over $1300. The most amazing thing was that neither he nor my mother had missed the extra money, even though they are retired and living on a pension. Shows how little we take notice of that small change and what we do with it.

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avatar J.C.

I just wrote an article about how much BoA’s Keep the Change program costs me. Since the introductory period is over, I only get the 5% match on the change, and a 0.2% interest rate. Since I have to keep a $300 minimum balance, it is really costing me money not to close the account and move the $300 to a high yield savings.

In summary, Keep the Change is great for 1 year. You get your match of up to $250, but then you should close your account and use a high yield savings and a cash back credit card… next on my to do list.

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avatar Cameron

@ J.C.
I agree with you. The introductory matching offer is really the only reason to do it. I regularly transfer funds from my BoA savings account (with its lackluster .2%) to my high-interest savings account (4.85%). For those using my approach, note that you need to “pull” from the savings account, not “push” from the BoA account on the transfer, if you want to avoid BoA’s transfer fees. If your high-yield account has transfer fees also, you could always go to your local BoA branch and take the money out physically. (I’ve been told physical banks still exist.)

Two additional downsides I’ve noticed to the keep-the-change program, for me at least: (1) it tends to spam my online statements, making them much harder to read; and (2) for some odd reason, occasionally the keep-the-change transfers get categorized as “uncategorized transaction” instead of “transfer” by BoA, for reasons that escape me.

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avatar singlemomindebt

RE: Bank of America, I have no minimum balance and no monthly maintenance fees with my account, so the Keep the Change deal is pretty good for me.

RE: Saving change…I do a combination of saving my change and using my change like EW mentions. I go to my change jar rather than the ATM when I’m driving somewhere and know I’ll be encountering a toll booth, for example. It is nice to have the change jar though, because I rarely have cash otherwise, haha.

Sarah

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