Round-up savings

What It Means

Round-up savings is a feature some banks and apps offer: each time you pay with a linked card, the purchase is rounded up to the next whole dollar and the difference is moved to another account. A $4.35 coffee sends $0.65 aside. Depending on the product, the change lands in a savings accountSavings accountA bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions. See more or in an investment accountBrokerage accountAn account at a brokerage firm that holds your cash and the stocks, bonds, funds and ETFs you buy and sell through that firm. See more, and that choice decides what protections apply.

How People Say It

• "My card rounds up and dumps the change into savings."
• "It's like a digital change jar."
• "I forgot about the round-ups and found $200 in there."

The Breakdown

Formula

Round-up on one purchase = next whole dollar minus the purchase. Rough monthly total = average round-up × card purchases a month.

Worked example. Five purchases from Chris's week:

That's an average of about $0.47 a purchase. At 40 card purchases a month, the change comes to roughly $18.88 a month, or about $227 over a year, if spending stays about the same.

What the result means. The total depends on how many purchases you make and on the cents, not on how much you spend: a $56.40 purchase adds less than a $23.10 one. For a goal with a deadline, a set transfer on payday is steadier, and you can run both.

Good to Know

Check where the change goes. In a savings account at an FDIC-insured bank, it's a deposit covered up to $250,000 per depositor, per insured bank, for each ownership category. When round-ups are invested, as FINRA describes some apps doing, they aren't FDIC insured and can lose value, and SIPC protection covers a failed brokerage firm, not a market drop. Look at when the transfers happen and from which account, so a batch of round-ups doesn't pull your checkingChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more balance too low, and read the app's fee schedule, since a monthly fee can outweigh small round-ups.

Related Terms and Categories

• Micro-investing

  Investing small amounts regularly, often a few dollars at a time through an app, usually by buying fractions of shares.

• Automatic savings

  Saving that happens on a schedule without a decision each time, through a split direct deposit or a recurring transfer from checking to savings.

• Savings account

  A bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions.

• High-yield savings account

  A savings account paying a variable interest rate that's generally higher than a traditional savings account's, often offered by online banks.

• Pay yourself first

  Moving a set amount into savings as soon as you're paid, before bills or spending, so saving comes first instead of from what's left.

• Savings rate

  The share of your income you save, found by dividing what you saved in a period by what you earned in that same period.

Saving and investing basics