Saving money is hard, it’s been proven that many factors play into why putting away some money into a rainy day fund is mentally tough.
Whether it’s trying to keep up with peers, lifestyle inflation, not earning enough, or the biggest one, being afraid of looking at your spending, they all play into the psychology of why it’s hard to save money.
A few years ago, cash was king, and putting a pocket full of coins in a jar after a day of spending was enough to stack up to a couple of hundred dollars after a few weeks. You were able to save thousands without really noticing it, and it was painless. Now, with almost all spending taking place on plastic cards, or even your phone, that coin jar could take decades to fill up! If you save digitally, that money sitting dormant on your baking app is just too easy to transfer over to spend away.
There are a few painless ways to ensure that you can put aside some cash without it being hard, one of the best ways is a “modern money jar”, also commonly known as a round up savings app in Australia.
These apps are the best for if you have trouble with remembering to transfer some money into your savings account. Some even withdraw money from your bank to invest into stocks or crypto, so you’re not tempted to spend it when you see it in your bank account, and so your money is put to work for you.
They work by connecting your bank account, so it can track how much you’re spending, some banks even include this type of product as part of their offering if you can handle seeing the money in your banking app.
The app will track how much you’re spending, and will “round up” the difference to the nearest dollar, so spending $3.50 will automatically withdraw 50 cents into your savings or investment app.
So, how much could you save using a round up savings app in Australia?
According to data from the Reserve Bank of Australia, throughout 2020/21, Australians on average made around 625 electronic transactions per person. If each of those transactions invested $1 in a fund earning just 5% p.a interest, after 5 years you’d have over $4,400, and would’ve earned over $670 in interest alone.
Nearly a thousand dollars a year saved from an average spending habit, investing just a tiny amount for each transaction?! You could buy an early 2000s model Corolla with that money!
Even if you spent for one year and didn’t contribute another cent, the interest you’ll earn after 5 years means you’d have around $800, leave it for another 5, and you’d have over $1,000, just from your spare change.
It goes to show that the “save when you spend” strategy might be the best way of saving money through the use of these round up savings apps.
Laila Azzahra is a professional writer and blogger that loves to write about technology, business, entertainment, science, and health.