What are Round-ups?
Updated: Jan 15, 2020
Do you know what round-ups are?
This is something that confused me greatly for a while until I finally found the answer for myself. Many websites like Stash, Acorns, Worthy, and savings accounts will allow you to do, what they call "round-ups". When I first heard of it, I was excited, but I was kind of confused.
The idea behind round-ups is that it tracks your spending and it rounds up every purchase to the next dollar. For instance, if you buy something that costs $2.63, then 37 cents will be tallied to go towards your savings/investment account.
This sounded really nice to me. But something that confused me was exactly how this worked. I'm very tight on my budget; I track all of my spending and write every single transaction down. I was confused as how this would work with my tracking methods.
Would my credit card statement have all of those amounts rounded up and I didn't have to even think about it (I was hoping for this)? Would I have to manually add them up? Does it withdraw 37 cents every time I had $2.63 on the card? Would it withdraw from my card or from my bank account? What exactly would happen? It was very confusing to me and I seemed to be the only person on the internet who wondered this.
That’s the reason I’m writing this, so I can clarify what this means for people who were confused like me.
Fortunately, there’s a YouTuber named Will Armstrong that I follow. I asked him about this and he quickly replied and helped me understand.
It turns out the way it actually works is round-ups only track your card; it doesn't alter your spending or expenses. It doesn't withdraw little amounts; it just keeps a tally on how much change you're saving up, so to speak. Then when you hit that certain mark (for Worthy, it’s $10), it withdraws that amount from your account and transfers it to the roundup account. What you're going to see on your card statement is your regular expenses, but then periodically, you'll see a $10 withdraw.
In order to accommodate this, I automatically round up all of my transactions when I write each of my expenses down.
One more factor
One thing to note, if it's an even dollar transaction like $21 and no cents, it will trigger $1 or will tally $1 on that on that ticker. So be aware of that. On my budget, whenever I have a whole number of dollars on an expense, I always make sure that I write down one more dollar than is posted on my statement, because that money will be counted towards my round-ups.
That's basically all there is to know. I think roundups are a great idea. Saving change can add up. It doesn't make that big of a difference, but every little bit helps. Clearly, the more transactions you make, the more roundups you will have, but obviously you're still spending a lot more money than you're saving here. Thus it should, by no means, be one of your primary saving methods. It's just a little extra help.
I would recommend doing some sort of round-up, if it is available to you. Check your banks and your brokerages to see if there is some sort of round-up option. It's just a little bit extra, so it makes a little bit of a difference. However, it's very easy to do and I think you can do it on basically any budget. Thus I'd recommend looking into it. If you use Worthy Bonds, they offer it, as do Stash and Acorns (even though I’m not as fond of those).