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. That loose change eventually gets deposited into a savings account. 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? Say you stop at your local coffee shop for a latte to go. It costs $4.65. With a round-up, the price is 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 and debit card products offer round-ups for transactions. Not all financial institutions offer round-up savings accounts, 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.

Quick Money Tip: If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.

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 also charge a monthly user fee.

In such cases, consider the monthly volume of transactions to make sure the cost doesn’t exceed 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 of money to save in total, but it can provide a nice boost to augment a more intentional savings strategy.

•   Just like other savings or investments, round-ups deposited into a savings or an investment account have the potential to earn a good interest rate. If the proceeds of round-up purchases are deposited to a savings account on a regular basis, 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.

Pros and Cons of Round-up Savings

It’s a fact that many Americans have trouble saving money. For example, almost half of all Americans have no retirement savings at all, according to a recent U.S. Census Bureau survey.

There are lots of reasons people have trouble saving — and for some, setting up round-ups can help them consistently set money away without having to think about it or expend any effort.

Wondering whether round-ups are right for you? Here are some pros and cons to note:

Pros of Round-Up Savings

Among the benefits of round-ups are:

•   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 personal finances.

•   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.

Pay Yourself — Every Time

Saving money can be hard work but using round-ups can automate savings and eliminate some of the pain of growing your finances.

With a SoFi Checking and Savings online bank account, you can enroll in the Round-up program to help grow your savings. What’s more, you’ll earn a competitive annual percentage yield (APY) and pay zero in account fees, which also can boost your savings. Need more incentive to see what SoFi can do for you? Another perk is that qualifying accounts can get paycheck access 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?

Various 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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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

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