Tuesday, October 20, 2020
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Tuesday, October 20, 2020

I tricked myself into building an emergency fund in college using a hack that would work for anyone

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  • When I was in college, I used a “roundup” strategy to trick myself into building some emergency savings.
  • Every time I made a purchase with a check, I’d note in my ledger that I’d spent $2 or $5 more than my actual purchase. That would trick me into thinking I had less money in my account at the end of the month.
  • The “extra” money — or the amount I’d rounded up on each purchase — became my emergency fund.
  • I don’t use a checkbook for much anymore, but I still use the idea of “hiding money” to help build my savings.
  • See Business Insider’s picks for the best high-yield savings account »

I’m old enough to remember when almost everything I bought was paid for by check. In college, I paid my rent with a check. I bought my groceries with a check. I sent the power company a check. 

Of course, there were some drawbacks to checkbooks, like it often took much longer for people to check out at the store, and if you lost your book or it got stolen, it was pretty easy for someone to take money from your account. 

But for me, checks and checkbooks worked well. I had a little way of fooling myself each time I wrote in the dollar amount of a purchase in my ledger: I would “round up.”

This technique — or trick — allowed me to build up an emergency fund that often put me in the position of being the only one of my friends who had any money to buy us all a pizza or pay for a trip to the grocery store at the end of the month.

For every purchase I made back then, I would round the amount up by $2 to $5. If the delivery driver said my order was $15.40, I wrote the amount in my ledger as $20. I did this for every check that I wrote. 

When I looked at my checkbook and it showed that I only had a few dollars left but the month still had a week or more in it, I would take out the statement from the bank and do a real balancing of my checkbook. There were times when I had between $50 and $100 more than the ledger said because of “rounding up.” 

In college, I did all this saving and figuring and fudging by hand, but now, if you want to practice a similar way of saving, there are a variety of apps and banks that offer “round up” options, such as Acorns, Simple, Qapital, and Chime. Each time you make a purchase, those apps will roundup the purchase amount and deposit the excess into your savings account.

I am sure that my accounting practices back in college would make a mathematician anxious, but the system worked so well for me that I always had a small emergency fund I could tap into when I needed it most. 

“Rounding up” had so many benefits for me in college that I carried this principal, if not the practice, into my life after graduation. 

Although checkbooks became less and less popular, I would stash $50 to $100 away every paycheck into an account that my husband and I didn’t include in our planning or our overall finances. 

After several years, once again using a kind of “trick myself” mentality, I started making automatic deposits into that account and just left it there to collect a small amount of interest and grow. I rarely checked how much money was in the account, because I rarely gave it a second thought. Unlike my college days, I never tapped into the account for end-of-the-month expenses. 

Three years ago, when we were looking at our finances so we could purchase a new/used car, my husband and I looked to our savings first, and then to the account I had started all those years ago. There was enough money in that “bonus” account to purchase a newer car without depleting our savings and without a monthly car payment. 

I’ve always been the kind of person who picks up change that I find lying on the street. I’ve seen the difference a little bit of change can make over time, and I don’t want to waste even a penny of the stuff. If you have to start small, it doesn’t matter, starting and continuing is the key.

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