Rounding up for riches: investors, savers and charities can benefit

Savvy savers and investors are keeping their eyes on the money ball and using spare cents to improve their financial strength.

Rounding up used to be an activity limited to maths lessons at school, but in recent years its use as a money-saving and wealth-building tool has boomed.

A growing range of apps and platforms are giving Australians a chance to leverage their loose change by rounding up purchases, usually to the nearest dollar, and sending those cents to a separate account.

The most prominent rounding platform, financial technology company Raiz, first appeared in 2016 and says it now has about 300,000 monthly active users who have saved $2.4bn in eight years. It says rounding is injecting $1.7 million each week into customers’ investment portfolios.

According to Moneysmart.gov.au’s compound interest calculator, saving and investing just $1 every day can turn into $5200 after 10 years and almost $16,000 after 20 years.

Financial institutions have been introducing rounding to their banking apps, some charities and supermarkets are doing it, and newcomers are expanding rounding beyond traditional investing.

Among them is former St Kilda AFL player Jason Gram who co-founded Cents2Bills, which helps people round up spending to put money towards their utility bills.

EFFORTLESS SAVING

“Like the old days of having cash in hand and then getting home and putting all that spare change into a jar until the jar overflows then we decide to take it to the bank, now the world is digital and this is the way of it,” Gram says.

Former AFL player Jason Gram co-founded a rounding business. Picture: Andrew Henshaw

“By rounding up everyday purchases to the nearest dollar and automatically transferring the spare change into a savings account or investment portfolio, these apps facilitate consistent and effortless saving.

“This micro-saving approach enables users to gradually accumulate funds without significantly impacting their day-to-day spending habits.”

Gram says Cents2Bills was founded to address the burden of utility bills and empower people to take control of their finances, and also offers cashbacks to members through more than 1000 Australian brands.

Raiz says more than 70 per cent of its users are Generation Y and Generation Z, the most tech-savvy generations, and CEO Brendan Malone says automating savings and investment processes helps people get ahead and stay ahead.

“Yesterday’s saving frameworks are losing relevance in today’s digital economy,” Malone says.

OVERSPENDING TRAP

Credit Union SA senior manager retail Gerald Jones says rounding strategies are the digital equivalent of putting change in piggy banks.

“I saved $30 last month alone by switching on the rounding-up feature within my Credit Union SA app,” he says.

“I have the rounding-up savings linked to my Christmas Club account, which has a regular deposit scheduled every month. So, by combining these two savings strategies, I can start to see how this is going to help me cover for this year’s Christmas expenses.

“Rounding-up is certainly becoming more of a commonly-found feature within mainstream banking apps.”

Gerald Jones from Credit Union SA. Picture: Supplied

Jones says people should take time to work out how their bank’s rounding features work, as there may be differences between them, and check if there are any fees.

“While rounding up can help you save, it’s important to note these benefits are based on your spending habits and frequency, so take the time to review both as part of your regular budget review,” he says.

“To maximise your rounding-up savings, have the surplus funds paid into a high-interest transaction account.”

Gram warns that overspending can be a potential trap.

“Rounding up purchases may encourage some individuals to spend more than they otherwise would to maximise their savings,” he says.

“While rounding up can be an effective way to save for specific goals, such as utility bill payments, it’s important not to neglect other savings priorities, such as emergency funds, retirement savings, or debt repayment.”

TIPS TO MAKE ROUNDING WORK

1. Set clear goals to motivate you to stick to your strategy.

2. Take advantage of bonus contributions if your app or platform allows it.

3. Review your rounding progress regularly.

4. Check if your rounding platform allows extra deposits to boost wealth faster.

5. Ensure your financial and personal information is secure and protected.

Source: Cents2Bills

Originally published as Rounding up for riches: investors, savers and charities can benefit