Personal finance has always been a passion for me but I’ve only recently gotten into micro-saving. It’s a handy tool that doesn’t require any effort that will save you thousands of dollars a year. To me, it’s essentially easy money that is of no risk at all.
Continue reading to find out how. Let’s start off with the basics.
What is micro-saving
Micro-saving is making small and irregular investments based on your everyday transactions.
Say you bought a coffee for $3.50. The micro-saving app will charge $4 but will save that extra 50c into your savings. Now imagine you drink 30 cups of coffee a month.
Firstly, girl stop drinking so much coffee haha.
Secondly, that’s $15 saving by doing nothing more than what you already did. You still purchased the 30 cups of coffee but you’ve make $15 out of micro-saving.
Essentially, loose change adds up and you can invest thousands in a year depending on how your frequent your transactions are.
Benefits of Micro-Saving
Now you know what it is, why are people deciding to micro-save as an investment strategy? There’s a number of reasons.
Convenient and easy
There are many apps, including Up Bank and Raiz, that will automatically micro-save. The process is automated and easy meaning little to no effort on your part to save your coin.
Raiz actually invests your money into ETFs (exchange traded funds) by aligning it to your risk tolerance (i.e. if you’re risk averse or risk loving). It’s super easy with little to no effort on your part. Literally investing made easy.
Most of these apps are really quick to sign up to and the apps are seamless. I use Up Bank which has been life-changing for me.
Up Bank has helped me so much with budgeting and the statistics and graphics are really informative whilst aesthetically pleasing which I love.
In only a couple of days into August, I’ve already micro-saved more than $11. Woo! Now, that’s 3 coffees.
I am able to see which categories I’m spending the most money as well as averages of how much I spent in certain stores. The statistics are actually so insightful and it is encouraging me to use it as my everyday savings account just so I can keep track easier. Using it as my everyday savings account means more transactions meaning more micro-saving.
Lol I spent more than $250 in on month at H&M. That’s more than groceries. Even though I live at home and hence am not the primary decision maker when it comes to grocery shopping, this is quite alarming. Not to fear! Up Bank allows you to keep on track with your budgeting and gives you great insights and analysis into where and what you’re spending on to keep you on track with your saving goals and curbing your spending addiction.
No deposit is needed – for advanced investors to beginners – what is saving?
Whilst investing normally requires a large deposit (to even be worthwhile, factor in brokerage fees, management fees, etc), you don’t need a minimum deposit to start micro-saving. In fact, apps such as Up Bank, are actually targeted at beginners and try to make investing fun and easy.
It has never been easier to invest so never think it’s too late to get into the game. It isn’t.
Disadvantages of Micro-Saving
I can’t write an article without examining both sides and there are both sides to every story.
Returns might be smaller than you think
The returns you may get at a micro-saving app may be disappointing. As mentioned earlier, these investments are usually determined by the app and it may be worthwhile to invest in your own stocks and ETFs. It’s important to shop around and really see what is the best deal out there.
Management fees may not be worth your time
In addition, there may be management fees. For low balances, the cost of fees may be enough to eliminate any returns you’re getting from micro-saving that it may not even be worthwhile.
For Raiz, $2.50 is charged monthly for balances under $10,000. For balances over $10,000, a monthly fee of 0.275% is charged. To illustrate, if you invest $100, $2.50 is charged every month but if you invest $10,000, $2.75 is charged. That blows. This may incentivise you to continue growing your balance to minimise your fees but ultimately, if you don’t have thousands to invest, it may not even be worth your time.
PS. I actually cancelled my Raiz account because of this.
Thoughts on Up Bank and why I think it’s one of the best everyday banking accounts on the market
I can’t say how much I love Up Bank. They do such a good job with branding and making investing as simple and fun as possible. I know a lot of people struggle with finances and it can be a taboo subject to talk among friends and colleagues.
Financial wellbeing can be just as important as your physical and emotional wellbeing. We all want that security of being able to control our day to day lifestyles whilst also having the financial freedom to have fun and enjoy life. I feel Up Bank has helped me immensely with this.
I also loved getting my card in the mail and it actually came with some groovy stickers and a fun game that makes you save $1,000 in a year. This is a really creative and fun idea and I’ve added it here if you want to play along.
Now Up Bank doesn’t actually invest your money in ETFS/index funds and I would generally use it as an everyday savings account. I’ve already mentioned why I love the micro-saving feature but it also has one of the best savings rates in the market.
You only need to make 5 transactions a month to qualify for the bonus interest rate which is currently 1.60%. It used to be 1.80% but this interest rate is still superior than most banks out there, especially the big ones.
|Up Bank Saver||1.60% (0.10% base + 1.50%)|
|Commonwealth Bank Net Saver (CBA)||1.00%|
|Commonwealth Bank Term Deposit (CBA)||variable but highest is 1.00%|
|Westpac eSaver (Westpac)||0.95%|
|ANZ Progress Saver (ANZ)||0.85%|
|NAB Reward Saver (NAB)||0.90%|
Comparing to the Big 4 banks, Up Bank’s interest rate is far superior. Another bank I recommend is ING. If you have read The Barefoot Investor (actually highly recommend if you’re thinking of improving your finances – IT IS A VERY GOOD READ), you will know this is the bank Scott Pape recommends. The interest rate for ING is currently 1.65% (used to be higher smh) so this is another great option.
Other Benefits of Up Bank
No ATM withdrawal fees
No monthly fees
No overseas fees online in store (perfect for travelling)
ZERO joining fee
I haven’t dealt with the customer service side of it but I can recommend this bank highly enough AND you can sign up and get $5 free.
Whilst you get $5, I will also receive $5. I don’t make any money off this blog so far but if you are interested and thinking of joining this bank I would really love if you would use my link.
How to get $10 Free Just By Signing Up
Comment on this post (your email should show up if you leave a comment) or message me via email /Instagram (@clarissaz_) /Twitter (@clarissa_zhu). I’ll be more than happy to give you a referral link and you’ll be on your way to hopefully being more financially secure (I hate the term financially free gross yuck).
I probably would only recommend Up Bank to Australian citizens and residents only. Whilst, it’s fully functional to use abroad I don’t know if it’s the best product available in your country.
Not only will you get $5 free for signing up, you can get another $5 if you make 5 purchases in your first month.
So not only will you have qualified for the 1.60% bonus interest rate, you’ll also receive $10 for free.
What a steal right? Not even a sponsored post but I should be sponsored- I could talk about this all day.
Regardless, which app or bank you currently use, I hope this post has given you an insight to what micro-saving is and how beneficial it could be to your financial long-term health.