With the cost of living on the rise, it’s getting harder to put away some money at the end of each month towards your savings. In the last six months, bank accounts and apps have been launched which promise to make this process easier, including in some cases investing the savings for you. But is this “set and forget” approach your best option to save or invest?
These accounts and apps are part of the “micro-investing” trend and are often known as “round ups”. The idea is that with each purchase you make, a small amount is rounded up to the nearest dollar and then moved to another account. ING Direct’s account, for example, offers to transfer the money into another savings account, whereas apps such as Raiz will invest the money in share market portfolios.
Round-up accounts and apps are convenient to use and are popular amongst those who don’t have large sums to save or invest – so here are some tips if you’re considering trying them:
• If the round-ups are being invested in shares, then make sure you understand the risks. Those small round-up amounts add up fast, and the share portfolios can be quite volatile.
• You might have more than just spare change left to invest – use Frollo to set up a budget, track your spending and set yourself a challenge to save money. By doing this, you will also be forming good financial habits which will allow you to save more and in the long run invest more.
• Monitor the round-up settings and amounts debited frequently – don’t get caught out by having more money taken out than you need for your expenses.
Have you tried a round-up account or app yet? Please let us know in the comments below!