About a year ago, I posted about how I was starting to use the “Keep the Change” program at my bank.
I was checking my accounts the other day and noticed that I had about $200 more than I was expecting to see in my savings account. Turns out I got a deposit the other day that included the promised matching contribution (100% for the first three months and 5% thereafter). I had forgotten about that part of it until now, so it was a cool surprise.
After being on the program for about a year now, I’d have to say that I’ve found it very worthwhile. Even if they didn’t do the matching contribution thing, I’d still use it, since it’s nice to just see your savings account gradually build up without even thinking about it.
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and that savings account only performs two to three percent under inflation!
well, with the matching it might be about at inflation…depending on how much you’re putting in each month and assuming you put the money into a cd every six months.
I think your data is a little off; US inflation is about 2.5% right now.
Besides, the point of the keep the change program is it forces you to save money that you otherwise wouldn’t be saving. Of course, you can always have other systems on top of that to save more significant amounts, but this is a supplemental one that you don’t have to plan or think about.
inflation is usually around 3%, but a savings account usually pays less than 1% (acrued monthly), so with 5% initial matching, your money only tracks with inflation for two months before falling off. i understand the value, i just wanted to point out that it’s a bunk investment if you don’t regularly move your money into better paying funds. otherwise, it’s better to just spend the money since commodeties hold their value better than cash…unless you would spend that extra money on beer, which is of course what i would do.
The 3% inflation rate and the 5% match are both annual figures, so inflation does not overtake the matching, even if your interest rate was zero.
As for just spending it instead, I think you’d definitely have to carefully choose what to spend on / invest in. You made it sound like spending it on pretty much anything would still be a better investment, but I don’t think there are many common objects that you could buy and sell for a year later and lose less than 5% on them.
i assumed the matching happened at deposit time. inflation is a constant and that’s why buying anything is better than earning less than inflation. even buying and consuming now is better than saving and buying in the future. you can pretty much buy anything, because inflation effects everything.
Yeah, as long as they keep up the 5% matching it will pretty easily keep ahead of inflation, unless inflation gets a lot worse.
As for the rest, I think I get what you’re saying but I still disagree that buying anything is better than earning less than inflation, because if you buy something you don’t need, you will be losing even more money/value.
If you take $100 and let inflation eat away at it you will have lost $3 after one year. However, if you buy something with it you don’t need, whatever that thing is will most likely plummet in value much farther than that within a month, and by the end of the year will be worth nowhere near $97, so you would have lost more by buying it.
but they’re not matching on money that is in there, so while you’re still getting matching on new money coming in, the cash that is in the account begins to decrease in value after a while. this is why i suggested pushing money into a cd every six months.
Sure, but the matching will already push it ahead of any amount that it would lose over the course of the year. Of course, you would want to move it into a better earning account after getting the match, but your initial comment made it sound like you’d actually be losing money and/or breaking even by doing this.
My firend does the same thing on her own, but no at B of A. she rounds up every check she writes. At the end of the year she get’s her bank balance, balances her check book and uses the extra for Christmas. It’s not an investment, it’s a matress savings plan. Better than spending nickles and dimes on this and that and never realizing where it went.