Quick savings tip: The Digital Pocket Change System

Thanks to SeniorLiving.org for the image.

Hello beautiful/handsome readers!

Some of you may or may not know that one of my many interests lies in personal finance. Of course, we’re all interested in our own personal finances, and rightly so, but what I mean is that I try to keep up on the latest trends (big influences being luminaries like Mr. Money Mustache and Ramit Sethi) and experiment with my own for ill or for, hopefully, profit, in an attempt to maximise the efficiency of my money management and hopefully come up with some things to help others do the same.

Today I have a small tip that could make a big difference, with its roots in a very satisfying form of savings you might remember from your childhood: the piggy bank/money box.

Can you remember the tactile thrill of slotting hard-won coins into your money box after mowing the lawn or polishing the shoes? Picking it up as it got more full to feel that satisfying heft that meant you were close to affording that new book/game/bike/whatever?

Any spare bit of pocket change you earned, found on the street, picked out from the couch cushions, begged, borrowed or stole could be thrown into your money box to grow your funds, bit by bit, until suddenly you realised you had amassed a small fortune, sitting there like a treasure chest of golden doubloons. It was a surprisingly effective way to save – throwing money in there instead of frittering it away on penny sweets or the like meant that a few weeks later you had enough for something really meaningful, like a new pack of Pokemon cards.

Golden doubloons. Now THAT’s money.

I miss money boxes, and in a world where paying with cash is, for most of us, no longer our default method, it has become as odd to see a money box around the place as it might be to see a record player or a VCR. Do kids even use them anymore or is pocket money delivered by standing order or PayPal transfer?

While I don’t have a solution to the physical aspect (although it might make for a cool IoT project…), I have been running something I call “The Digital Pocket Change System” for the last few months and the results have been surprisingly good, saving nearly a hundred more per month, on average.

In a nutshell, the system is this:

1. Log in to your main internet banking account once per day (if you don’t have your internet banking setup, get on that ASAP).
2. Look at your current account balance.
3. Round your balance down to the nearest five (or ten, if you are really hardcore). For example, if you log in and find you have 243.20 in your account, you’re going to round down to 240. 467.80 becomes 465.
4. Take that difference, and put it into your savings account. If you have multiple savings accounts, either go with a round robin system, or, if that’s too much work (it was for me) just centralise all this pocket change in one account and split it at whatever ratio you wish to the other accounts.

There are days when I’ll log in and end up sending 20 cent to my savings account, absolutely, and that’s probably not going to move the needle for anyone. But there are also days when I end up sending 4.95 to my savings account, and a few of those in a month can make a big difference. There’s a nice side benefit of often seeing a beautiful round number as your account balance that appeals to my OCD leanings.

It feels very palatable as well, hooking off that same impulse that makes it seem inexpensive to buy ten 99 cent apps on your phone but a big deal to buy one 10 euro app. Putting 2.20 into your savings account of an evening doesn’t feel like a big deal – less than most coffees – and you’ll surprise yourself with how much extra you end up saving by the end of the month, or year, using this approach.

While this tip should absolutely not be in lieu of a proper “pay yourself first” approach, with automatic savings coming out of your account on/just after pay-day in larger quantities, by using this approach you might be surprised how much extra you can save, in a very low-risk, addictive manner.

Give it a shot if you’re after some of that old-school piggy bank savings fun, or just want another way to up that savings amount, and let me know how you get on!