Spending to Save
Recently we have all been inundated with advertisements for various savings plans offered by national banks. Bank of America offers the Keep the Change program. American Express One offers the Savings Accelerator. Are these plans really a good way for the American public to save money?
The American public has a horrible savings rate. Most people not only do not save, but are also in debt up to their eyeballs. Savings is the last thing on their minds. The various savings plans being offered by banks via credit cards and savings accounts seem like a good deal, but they require careful control of your finances. The following are a list of programs being offered as found in a recent article on the subject by Liz Pulliam Weston:
- Bank of America’s Keep the Change
- American Express One Card’s Savings Accelerator
- Fidelity Investment Rewards MasterCard
- Fidelity Investments 529 College Rewards Card
- Citi UPromise Platinum Select MasterCard
- BabyMint Platinum Plus College Savings Card from MBNA
- Stockback Visa Credit Card from MBNA
- NestEggz Platinum Plus MasterCard from MBNA
- Citi Home Rebate Platinum Select MasterCard
Read Ms. Weston’s article for the details of each program, along with her recommendations on who these accounts are more likely to benefit.
The truth is none of these programs are without their catches. Some require an annual fee while others require you to let the company give your personal information to their affiliates for marketing purposes. The best one would seem to be the Keep the Change program from Bank of America, but even then your purchases are being rounded up to the nearest dollar amount, so you have to watch out to make sure you are not plagued with overdrafts (and the subsequent overdraft fees) which would cost you more than you would make in change or the Bank of America program match. Many of the credit card programs require you make at least one purchase on the card a month. If you have a problem with credit cards and gaining debt, then this could become a very large hazard in debt control since you could find yourself subject to high interest rates once you begin to carry over a balance.
Is it true Americans need to save more? Yes, but these programs ought to be a last resort, not your primary savings method. America Saves has many savings suggestions on their website. Their basic 5 strategies are as follows:
- Pay off high-cost debt.
- Buy a home and pay off the mortgage before you retire.
- Participate in a work-related retirement program.
- Outside of work, save monthly through an automative [sic] transfer from checking to savings.
- Earn up to 4% of more on many CDs or U.S. Savings Bonds.
Many other savings tips are on their website, which is a recommended read. Their personal wealth estimator is an interesting tool to figure out personal net worth (your assets, including equity in property, minus your debts).
Saving money is certainly not as hard as it sounds. No one should be required to spend money to save money. It is more important to put aside your money into a savings fund for future use. This includes building a viable budget and managing your funds in a responsible manner.
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