Is Bank of America's “Keep the Change” Good For Your Family?

From time to time I will write a blog post on current issues or ideas facing young families and their quest for financial peace. If you have questions or topics that you would like for me to address shoot me an email and I will address it. One reader asked me about today’s theme: Is Bank of America’s program, “Keep the Change” good for my family? 

1.    For those not familiar with the Keep the Change program here are the highlights: You get a Bank of America debit card, Bank of America Checking account and bank of America savings account. Each time you use your debit card, the card issuer rounds up the difference to the next dollar amount and deposits it into your savings account. For example, your fast-food lunch comes to $5.19. You swipe your card. The charge against your account is $6, and 81 cents goes into your savings account. Over time the thought is that your savings will grow as you swipe your card. 

2.    At first glance I really liked the program.  It falls right in line with a principle that I preach of automating your savings. Set it and forget it and you will never miss it. This is great and there are a few other programs that have similar programs. Wells Fargo and the app Acorns come to mind. 

3.    But on closer inspection I do not like the program for a few reasons:

a.    You actually save very little- Over the course of a year you will not actually save that much money. So if you are considering switching your banking relationship just for this benefit, think again. Let’s say that on average you accumulate through rounding up $1 a day. You are only saving $30 dollars a month of $365 a year. That will not really move the needle for your retirement or college savings goals. 

b.    It encourages bad behavior- the premise behind Bank of America’s campaign is to make you feel better about swiping your card and spending money. The tag line of the campaign should be the more you swipe the more you save. But every time you swipe you are spending not saving. If every swipe was a real necessity then it wouldn’t be a problem but if you are swiping multiple times a day it is most probably not a necessity. You don’t save by spending more you save by not spending. 

c.    It may give you an excuse to not actually save- Many people will consider this their saving plan and that is just a lousy plan. You saving plan need to be linked to your goals and you goals will require a lot more than $1 or ever $2 a day. You will need to contribute real money to your savings that are not linked to you spending more.

In summary I love the idea of automating your savings but I don’t like the idea of having this automation triggered by spending. 

Instead set up a auto payment from your checking account to your savings account every day for $2 and you will well ahead of Bank of America’s “Keep the Change”. 

Thanks, Bank of America, but I will keep the change.