What Are Round-Up Savings?

Round-ups are an automatic savings tool that rounds up purchase prices to the nearest dollar. The difference between that somewhat higher figure and the actual price then gets deposited into a savings or investment account.

One of the key benefits of this savings technique is that it’s effortless. The money accrues without your doing any calculations or transfers. It’s akin to the saving technique in which people pay cash for purchases using bills and accumulate change in a jar that they eventually bring to the bank and deposit. Round-ups accomplishes the same goal, but there’s no lugging coin jars involved.

If this round-ups concept sounds interesting, read on to learn more, including:

•   How does round-up savings work?

•   Do banks offer round-up savings?

•   What are round-up savings apps?

•   What are the pros and cons of round-ups?

How Does Round-Up Savings Work?

Need a real-world example of how round-up savings works? Let’s say your bank account offers round-ups and you opt in to the service. You then stop at your local coffee shop for a latte to go. You pay $4.65 with your debit card. The price would be rounded up to $5, with $4.65 going to the merchant and 35 cents to the account you have designated.

Now, 35 cents might not sound like much, but think of how many times you swipe or tap that card. It’s not uncommon for people to make 30 transactions per week and save more than $10 per week with round-ups. That would be in excess of $520 a year, not including the power of compound interest which can boost the amount higher still.

With some providers, these small amounts of change accrue and then are deposited into the user’s account in a lump sum once they hit a certain dollar-amount threshold or a specific time period has passed. With others, the funds may be deposited as soon as the transaction settles.

Do Banks Offer Round-Up Savings?

Some bank accounts offer round-up savings for transactions. However, not all do, so if the notion sounds like the right tactic to help you save, consider investigating whether the feature is offered before deciding where to open an account.

It can be a good perk that helps add to your savings, whether your goal is accruing the money you need for an emergency fund or getting enough moolah together for next summer’s vacation.

How does a round-up savings account work? Typically, you will have linked checking and savings accounts at a bank. The debit card for the checking account can be activated to round up the price of purchases. The difference between the actual cost and the rounded-up price is then transferred to the checking account.

Round-Up Savings Apps

There are also standalone round-up apps, which users can typically connect to a credit card, debit card, or checking account. The app then monitors transactions and either transfers the proceeds of round-ups in batches or allows users to transfer money on demand.

Some standalone round-up apps may charge a monthly user fee. In such cases, consider the monthly volume of transactions to make sure the cost is significantly less than the amount of money round-ups will help to accrue for savings. The point here, of course, is to grow your wealth, not nibble away at your money.

Recommended: 5 Types of Savings You Should Consider Having

Round-Up Savings Can Add Up

While saving 23 or 85 cents here and there may not sound like much, any coin jar saver who ever went to the bank with $100 in change can attest that putting away small amounts can add up fast. Consider the following:

•   Saving just five extra dollars a week in round-ups adds up to $260 over the course of the year. This may not sound like a lot to save in a year in total, but it can provide a nice boost to augment a more intentional savings strategy.

•   Just like other savings or investments, round-ups have the potential to earn a good interest rate. If the proceeds of round-up purchases are deposited into a high-yield savings account on a regular basis, for example, that spare change would grow — and could continue growing — each time interest compounds. For round-up investing, those small savings can, over time, help in the purchase of additional shares which may also grow in value.

For round-up investing, those small savings can, over time, help in the purchase of additional shares which may also grow in value.

Pros and Cons of Round-Up Savings

It’s a fact that many Americans have trouble saving money. For example, about one-quarter of U.S. adults age 50 and older have no retirement savings at all, according to a January 2024 survey by the AARP.

While saving via round-ups won’t be enough to reach a lofty savings goal like retirement, it can help augment your savings. It can also help you get into the savings habit.

If you’re wondering whether setting up round-ups is worth the effort, it can be helpful to consider the pros and cons.

Pros of Round-Up Savings

Here’s a look at some of the main benefits of using round-ups as a saving tool.

•   Round-ups are a positive step in financial selfcare. One reason round-ups can be a useful savings tool is they help someone pay themselves with each transaction. Kind of like tipping oneself, round-ups pay the saver a little something extra on their purchases, making everyday spending a little more rewarding.

•   Round-ups are automatic. Part of why saving can feel painful is that it requires the saver to make difficult decisions on a regular basis. Once round-ups are set up, no conscious sacrifices are required. You don’t have to engage in any potentially painful decisions about, say, how to save money on streaming services or your utility bill.

Automating personal finances can be a helpful tactic to encourage healthy habits, and round-ups can be a valuable part of this seamless approach to money management.

•   Round-ups show visible progress on your savings goals. For those who are already putting money into savings on a regular basis, taking advantage of round-up features can help to grow that money more rapidly, putting savings goals within even closer reach. For those who aren’t currently saving, seeing round-ups grow as you swipe or tap your debit card can be an encouraging experience.

•   Round-ups may help counter savings procrastination. While some people save early and often, others may put it off. There are lots of reasons for procrastinating on starting a savings plan and surely many other tempting ways to spend your cash. Round-ups can help motivate savings procrastinators by demonstrating the effects of putting money away on a regular basis.

Cons of Round-Up Savings

While round-ups work well for many people, there are some downsides to consider as well.

•   Round-ups may come with fees. When opting into a round-up service, review the fees. Saving $5 a week seems great, but if fees are going to cost you $2, is that worth it?

•   Round-ups could throw off a careful budget. If you are on a very tight budget, rounding up could tip things out of balance. Also, people who often have a low balance in their checking account could overdraw their account due to the automatic round-ups fee being debited. That, in turn, can lead to overdraft or NSF (non-sufficient funds) fees. Review program requirements for round-ups and your bank accounts’ guidelines before opting into anything.

The Takeaway

Saving money can be hard work but using round-ups can automate savings and eliminate some of the pain of growing your finances. If you’re interested in setting up this incremental approach to saving, you might sign up for a round-up app, then connect your debit or credit card to the service. Or, you can look for a banking partner that offers this feature as a perk to their account holders.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Do round-up savings work?

Round-up savings can work by increasing the price you pay on transactions to the next higher dollar amount and depositing the difference in a savings or other account. However, be aware that some round-up apps may charge a fee, which may diminish the amount you save.

What is a round-up savings account?

A round-up savings account is one in which your debit card transactions from a linked checking account are rounded up to the next dollar amount. The rounded-up amount (the difference between the actual price of the goods or service and the price you paid as a round-up) then goes into your savings account where interest can help it grow.

Do banks offer round-up savings?

Some banks offer round-up savings. How it works: When you use the debit card linked to your checking account at the bank, the cost of a purchase will be rounded up to the nearest dollar. The extra money then gets deposited into your linked savings account where it can grow.

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