I saved £150 in a year without doing ANYTHING – and here’s how you can too
ROUND-UP savings accounts are a nifty way to put cash aside without even noticing it.
Banks and other current account providers round up all of your transactions to the nearest pound, and put the difference into a savings account for you.
The idea is that every time you buy something, you also put a little bit towards your savings.
So if you buy a coffee for £2.76, 24p will be added to your account. If you bought a McDonald's double cheeseburger for £1.69, you'd save 31p, and if your weekly supermarket shop came to £99.29, you'd save 71p.
The most you'll save on each individual transaction is 99p, but over the course of the year it can soon add up.
How much am I likely to save?
How much you'll make in total depends on how many transactions you make through the round-up account.
I activated a Save the Change account with Lloyds bank in January 2020. By the end of that month I'd save £26.43 in total.
By the end of the first year, I'd squirreled away £155.89, not bad given you don't even notice the money going out.
So far this year, I've saved £120.92 by rounding up, and I'd expect to hit £150 by the end of the year, once Christmas shopping is out of the way.
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Moneybox, another round-up savings provider, says that so far its users make around 30 transactions per week with an average round up of about 28p.
This results in £8.41 savings per week, £33.64 per month, or £437.32 from round ups alone.
If you're the type of person who does lots of little shops or who frequents daily coffee bars, you're likely to save more than someone who does a big weekly shop and drinks coffee at home.
Equally, if you use your credit card and pay it off each month to build credit, this is unlikely to be a savings method for you.
The ONS has some statistics on weekly household expenditure, which may give more insight into how much a typical person could save.
It says that the weekly spend for the average household per category is:
- Food and non-alcoholic drinks - £63.70 (round-up 30p)
- Cigarettes - £2.60 (round-up 40p)
- Alcohol (brought home) - £12.90 (round-up 10p)
- Clothing and footwear - £23.40 (round-up 60p)
- Furniture and furnishings - £20.10 (round-up 90p)
- Appliances - £2.90 (round-up 10p)
- Glass and tableware - £1.80 (round-up 20p)
- Tools and house equipment - £3 (round-up 0)
- Cleaning materials and household maintenance - £6.80 (round-up 20p)
- Health including medicines and hospital services - £8.20 (round up 20p)
- Running a car - £33.60 (round up 40p)
- Public transport - £21.70 (round up 30p)
- Communication include mobiles and internet - £21.40 (round-up 20p)
- TV and music equipment - £74.80 (round-up 20p)
- Games, toys and hobbies - £3.20 (round-up 80p)
- Computer software and games - £1 (round-up 0)
- Equipment for sport, camping and open-air recreation - £1.70 (round-up 30p)
- Horticultural goods, garden equipment and plants etc - £2.80 (round-up 20p)
- Pets and pet food - £6.80 (round-up 20p)
- Sports admissions, subscriptions, leisure class fees and equipment hire - £19.80 (round-up 20p)
- Cinema, theatre and museums etc. - £3.30 (round-up 70p)
- TV, video, satellite rental, cable subscriptions and TV licences - £4.70 (round-up 30p)
- Newspapers, books and stationery - £5.50 (round-up 50p)
- Education - £4.50 (round-up 50p)
- Restaurants and catering - £41.30 (round-up 70p)
- Hotels - £11.60 (round up 30p)
- Personal care including toiletries - £13.40 (round-up 60p)
- Personal effects such as jewellery, handbags, sunglasses and baby equipment - £4.20 (round-up 80p)
- Social protection - £3.70 (round-up 30p)
Presuming you spent the average household amount per week, and you only did one transaction for each category, you'd be saving £10.50 per week, 45.50 per month and £546 a year - similar to the trends MoneyBox are seeing.
Are round-up accounts the best way to save?
Round-up accounts are really helpful for building up savings without having to think about it much.
Even better, you're unlikely to notice the small amounts of pennies going out, which means you won't miss spending them.
That said, these kinds of accounts aren't going to make you loads of cash - so if you have a savings goals in mind, you're almost certainly better off setting aside a specific chunk of money at the beginning of the month before you can spend it.
But if you're not in the savings habit, or want some extra cash set aside (for instance for Christmas) then they're great.
One of the biggest downsides of these sorts of accounts is that most of them pay little or no interest.
You can get round this by transferring the amount you've saved at the end of each month to a higher interest savings account or an investment account where your savings will grow.
Plenty of banks offer monthly savings accounts with decent interest rates,s so you could transfer your cash to one of these.
That's the most sensible approach, but if you're worried you might be tempted to blow the savings, it might be better to leave them out of sight and out of mind.
If this kind of saving really appeals to you, but you don't want your cash sitting in the bank without interest, there are now one or two accounts that pay much better.
Which banks offer round-up accounts and who pays the best interest?
There are plenty of financial providers offering round-up accounts from traditional old school banks to challengers.
For the savings scheme to work, it makes sense to link it to whatever current account you're using for your day-to-day spending, so it might be worth checking if your existing bank offers a scheme.
If your bank doesn't you could think about switching, or using one of the digital apps that can work with your existing bank account, such as Plum or Moneybox.
By far and away the best round up account is the new from JP Morgan. It offers an astonishing 5% interest on your round ups as well as 1% cashback on purchases.
Other providers offer anything between 0% and up to 1.7% depending on who you go for, which savings account you choose and whether the account is free or not.
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Here are all the banks and apps offering round up solutions and how much interest they pay.
- Chase - 5% - apply
- Revolut - up to 0.65% - apply
- Moneybox - up to 0.60% (or investment returns) - apply
- Plum - up to 0.40% - apply
- Starling - up to 0.05% - apply
- TSB - up to 0.04% - apply
- Monzo - 0% for free accounts and up to 1.07% for paid accounts -
- Halifax - 0.01% - apply
- Bank of Scotland - 0.01% - apply
- Lloyds - 0.01% - apply
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