3 Invisible Savings Tips That Work
With money tight these days for so many people, it's worthwhile considering some subtle "invisible" savings tips to ensure you're meeting your financial goals. When money was tight as a fresh college grad, I had devised a few different ways to set aside money without really noticing it. This both removed the temptation to spend it and the deterrent to give up when I was having a tight month, since these methods were virtually invisible! (See also: 5 Ways to Save Money on Everyday Expenses)
1. Checkbook Roundup
Before the advent of online banking, I was writing 15-20 checks per month. No matter what the payment amount was, I would always round up to the next full dollar amount and record that in my ledger. When something was $1.20, a $2 entry went in and so on. After a couple years, my checking account balance was several hundred dollars greater than what was showing in my checkbook ledger. This served two purposes: First, I'd be hard pressed to bounce a check with a buffer that large, even if I accidentally forgot to record a check or ATM withdrawal. Second, after a few years of this, it was a nice unplanned couple hundred dollars I could draw down to rebalance and start over again once I had accounted for all recent outstanding checks that hadn't been processed yet. These days, if you write very few checks, the system may not generate much in the way of invisible savings, but I still practice it to this day. I like the idea of the cash buffer in there. With interest rates close to zero, the opportunity cost on a few hundred dollars is inconsequential, and it's reassuring to know that if my wife or I forget to record an entry, it's covered.
2. Save Every $5 Bill
The neat thing about $5 bills is they are somewhat rare, yet not so painful to part with for an invisible saving method. I used to pay for almost everything in cash, and I tended to deal with 20s and singles quite a bit. On the occasions where I was handed a $5 bill for change, it went right in my invisible savings jar that night. See, the $5 bill is small enough and rare enough that I didn't really miss having it, yet after a year or so of a five per week, I'd saved around $250.
3. Never Use Change
Aside from the fact that watching the customer in front of me dig around and count out pennies to pay the cashier drives me batty, I've derived more pleasure from saving and investing my change than carrying it around and counting it out. I've always just dumped all my change in a can and then counted it out and savored the pleasant surprise. I used to do it the hard way with coin rolls, but now many banks have automatic change counters for free.
Each of these methods might realistically only yield a few hundred dollars per year, but that's a few hundred dollars you probably wouldn't have saved otherwise. And it's practically invisible!
Important: Have a Strategy for Deployment of Your Invisible Savings
Saving this money is only half the battle. If it's holiday time, you've saved $700, and you go blow it on an impulse purchase, that probably wasn't your initial intent at the beginning of the year. What I used to do with these savings was to deposit the money every quarter or so, even if it was just $100, and write a check for an equivalent amount to a dividend reinvestment program (DRIP). Essentially, these programs allow you to buy partial shares of common stock from publicly traded companies at any time, often for free or a very low fee. By forcing myself to divert these funds to a pre-determined objective, over several years, I was able to amass a nice portfolio of large blue-chip companies simply from invisible savings. Perhaps your objective might be a 529 plan contribution for the year (see 529 pre-paid vs. tuition strategies), Christmas shopping money, next year's travel fund, or simply building up your emergency fund.
Do you have other "invisible" savings methods to share?