Ever wonder why prices always end in $.99 and not a whole number? While that’s a psychological trick retailers and companies use on us, it is also the prices and sales tax ranging from 7-9% that can lead to uneven prices at check out. Have you ever wondered how you can turn those numbers into whole numbers at check out and make money?
Ok, I’ll admit that the prices won’t change on the screen and the cashier would hand you money instead of you handing them money. But there is a method called round up saving/investing. Companies such as Acorns have built around this model of investing and banks use this to incentive savings.
So how does it work? You create an account with a company like Acorns or your bank for savings and link your credit cards and/or debit card. When you pay for something, for example, $1.08 at Dollar Tree with a 8% sales tax included for candy, the program would round it up to $2 and 92 cents would either be invested or saved depending on what you want.
This comes to a cost for investing, though. For Acorns, the basic plan is $1 per month, middle is $3, and advanced is $5 (December 2020 prices). The basic plan suffices for round up investing and the middle and advanced both offer different extra perks like banking.
Now let’s say, with rounding up on all bills paid with credit/debit such as utilities, food, and other expenses makes about $20 dollars each month. Then, invest that into a S&P 500 index fund averaging 7% year over year for about 55 years. The total would be around $138,000 (without inflation). Now if you have $30, the same result would be $207,000. If this money were to be placed into a Roth IRA and using the $3 per month plan, the money would be tax free for retirement, but the monthly costs would have totaled $1980 dollars for Acorns.
The total amount per month for round-ups may vary from person to person, but it is a great way to save for your golden years! And it helps create even numbers on account balances. Happy holidays and investing to become the next Teen Trillionaire!
Written by Ian Cohen