Saving shouldn’t feel like failing. However, between paying off credit card debt and dealing with higher costs across the board, carving out money from your paycheck to set aside for the future can feel like a challenge. And if you feel that way, you’re not alone. Bankrate research shows that more than half of Americans find it difficult or impossible to save money.
Loud budgeting has become the rallying cry for anyone trying to help their friends and family understand why they might not be able to go out this weekend or join them on that spring break vacation. However, getting ahead financially isn’t just about cutting back on your spending -- it’s about finding ways to save money, too. If you’re struggling to save, consider a microsavings strategy.
What are microsavings?
Microsavings is exactly what it sounds like -- smaller amounts of money to put toward savings goals. It shrinks the numbers you might traditionally associate with a savings strategy down to a fraction of the size. For example, instead of aiming to put aside $500 per month, a microsavings goal might be $1 per week.
There are no specific guidelines for what defines a “micro” piece of the puzzle. The idea is simply that moving small amounts of money to your savings account can help you better stick to savings goals. If you’re often setting lofty savings goals you can’t meet and find yourself frustrated, taking a microsavings approach might help. It focuses on the act of saving and making it mindless, rather than trying to set aside large chunks of money.
Benefits of microsavings
The microsavings approach has some huge upsides, including:
- Boosting your morale: Microsavings enables you to set attainable financial goals. While you might find it impossible to save $50 every week, for example, you can likely find a way to save 50 cents. And knowing you’re making progress toward building your savings, however incrementally, can help you feel more in control of your financial situation.
- Helps build a savings habit: Saving money is all about establishing a routine. Setting a realistic savings goal makes it easier to maintain the habit of setting aside funds.
- May earn interest: Some microsavings accounts pay interest, which means you’ll earn a little extra money on top of your savings. It’s a win-win.
What are microsavings accounts?
A microsavings account is a bank account that’s designed for smaller amounts of savings. Depending on the bank or financial institution that owns the account, your money might be insured by the Federal Deposit Insurance Corporation, and it could also earn interest.
Some microsavings accounts analyze your spending habits and pull money directly from your checking account into your microsavings account or app. Others might round up each time you spend money, moving your spare change directly to your microsavings account. This can make accruing microsavings even more mindless and less stressful.
Examples of microsavings apps
SmartyPig
SmartyPig is a microsavings account from Sallie Mae that comes with a long list of pros: no fees, no account minimums, automatic deposits and a competitive APY of 4.25%. You can also create multiple savings goals to keep track of different financial objectives.
Acorns
Acorns is more than a microsavings app -- it’s also a microinvesting option. In fact, the company says its users have invested over $20 billion collectively. You can use it only to save money, but the company’s real value is as an investing tool that lets users take advantage of the stock market -- which has proven to deliver significantly higher returns over time.
Acorns costs between $3 and $9 per month, but if it can help you learn how to set aside more money that grows with compound interest, it could be worth it. Plus, the higher-tier membership plans -- which cost $5 and $9 per month -- offer 3.00% APY on your checking account balance and 5.00% APY on your emergency fund.
Qapital
Qapital is similar to Acorns with both microsavings and microinvesting features, but this service comes with a couple of differentiators. You can automate saving and investing by setting rules -- save whenever you go for a run, for example -- and share those goals with a partner.
Pricing runs between $3 and $12 per month, and there’s a 30-day free trial period to see if Qapital fits your needs.
Oportun
Oportun (formerly Digit) syncs with your bank account to analyze your spending patterns and determine how much you should be saving. Its savings offer, Set & Save, can help you sift through your transactions and offer a personalized recommendation for your savings goals.
This service is $5 per month after a 30-day free trial. Additionally, the company offers products -- personal loans and credit cards -- that will help you spend money, too, so keep your attention focused on saving, regardless of any offers you receive.
Rounding up to achieve your savings goals
If you don’t want to have separate savings and microsavings accounts, there are plenty of banking options that offer one of the key features of microsavings: round-ups.
Rounding up is simple. Every time you make everyday purchases with a linked debit card, the bank automatically rounds up that purchase to the nearest dollar and transfers the difference to your savings account. For example, if you buy a coffee for $4.55, a round-up feature moves $0.45 to your savings account.
In some cases, the service isn’t solely linked to your debit card. For example, with Ally, if you pay a $52.12 utility bill from your checking account, $0.88 goes into your round-up bucket.
Here are some of the biggest names in banking that offer the option:
Plenty of smaller banks and credit unions also offer round-up features, so be sure to compare your options. Some of those smaller institutions even pay a bonus for reaching certain savings goals.
The bottom line
Setting large savings goals can feel like trying to drive across the country by yourself without stopping for any sleep: How are you ever going to get there? Is it even possible?
Don’t let those big numbers get you down. Microsavings can be a powerful tool to build the momentum you need to spend less and save more.
FAQs
The biggest downside to microsavings is the potential to lull yourself into a pattern of setting financial goals that are too easy to reach.
Think of saving money like being an athlete. At the beginning of your journey, you might set a goal to run a nine-minute mile. Once you can do that, though, you need to adjust your goal and aim to get even faster. If you’re starting out with microsavings, make sure you know when to adjust to a “macro” approach.
Microsavings accounts are similar to traditional savings accounts, but the big difference is that you don’t need to make a large minimum deposit to open a microsavings account or worry about receiving a sizable monthly direct deposit.
However, it’s important to note that, like traditional savings accounts, some microsavings accounts charge a monthly fee. This fee typically starts at around $3 or $5 and can eat into your savings.
To open a microsavings account, you’ll likely need to provide your personal information, including your full name, address, birthdate and a copy of your government-issued ID. In some cases, you may need to share a copy of a utility or internet bill to verify your address.
Additionally, you may need to have a checking or savings account at another institution that will serve as your regular funding source for the microsavings account.