When you were younger, did you ever own a piggy bank? One in which your parents made you put all your spare change? And whenever you needed money, you would debate whether it was worth breaking the piggy bank and starting again or just wait it out? I remember mine. It was Mickie Mouse shaped and used to get so heavy because I would put every single penny I could find in the house in it. The heavier it was, the richer I felt. Well, as rich as pennies and two-pence can ever make you feel.
Years later, I have a new piggybank. Only this time in true millennial form, it’s an app on my smartphone that not only lets me save my pennies but invests it in stocks and shares too. I’ve swapped Mickey Mouse box for the Moneybox App.
At first I downloaded the app more out of curiosity than to save. A friend casually mentioned it in conversation and I’m willing to try anything that helps encourage saving.
The concept itself is ingenious in its simplicity – by rounding up your everyday purchases to the nearest £1, the app allows you to gather and invest all your spare change. Initially it might seem like insignificant amounts are being invested and I’ll admit after the first month, I looked at the measly £7.46 I had saved, remembered the £1 subscription fee that was looming (the first 3 months are free) and thought “this friend of mine sold me jazz, I’ll never listen to him again”. Four months later, the app is still on my phone and I’m now £60 in deep so maybe he did know what he was talking about.
How it works
So you’ve downloaded the app, what’s next? The app will prompt you to link your debit cards so it can track your transactions for round ups. My advice is to link as many debit cards or the debit card you use the most so it can monitor and round up all of your spending. When I first started, I used an American Express as my main payment card and that couldn’t be linked to the app. That meant my weekly round ups were small as I barely used my debit card. Hence the £7.46 after the first month. I’m now in major savings mode so I’ve, sadly, retired the AMEX and I’m using my debit cards more. This has meant more money being rounded up and my portfolio increasing a little quicker.
After you’ve linked your debit cards*, the app will ask you to link a bank account. This is where it will take out the money you’ve saved from the round ups. At this point, it’s important to point out that a “round up” is only an intention to save. At any point in the week, you can decide you don’t have those extras £s and move your round up value to £0.
I’ll break it down:
Let’s say I buy coffee with my debit card for £2.45. The app will show a “round up” of 55p. Then later on in the week, I buy a meal deal for £3 and tap in / tap out of the tube for a total of £6.55. That’s a roundup of £1 and 45p respectively.
At the end of the week, the app will show my total round ups as £2 and then later the next week it will deduct the £2 from the bank account I have linked. Anytime during the week, I can cancel that intention to save by removing the £2 from my round up pot, or I can increase it by manually inputting a figure I want to save instead.
The great thing is once you have all the details linked, the app does the work for you. I’ve chosen to automatically save my round ups so the app automatically invests whatever it gathers during the week without me looking at it.
Things to consider
Although I do like the app, I’m not yet at love. I may be at love once I start hitting those quadruple figures. Here are some of the negatives and how I countered it in my head:
Disrupts your budgeting. This is major for me. The idea is great, what’s a few pennies more from what I initially was going to pay if I know it’s being stored for a good cause. However, those pennies do not come out when you make your initial transaction. For example I don’t pay for a £6.50 coffee and £7 leaves my account in that one transaction. Instead, the app makes a round up which is an “intention to pay” and only takes that 0.50p later on that week from a bank account you’ve linked to it. If you’re on a tight budget like I am, that can be a slight shock. And extra £5 a week in theory is great, until you realise in reality you forgot that an extra £5 was going to leave your account at the end of the week and your balance isn’t what you thought it would be. I had to keep reminding myself to make sure I had extra money in there for Moneybox.
There is a subscription fee of £1 a month plus 0.45% annual platform fee. That might not sound too expensive, but remember you don’t get high interest from low savings. So it is unlikely in your first couple of months that you’ll have enough saved from round ups to subset the subscription fee. However, the first three months are free which gives you some time to gather up the money and if you keep at it the pennies will add up and you will reap the rewards. At the end of the day, even if the fee comes out of the money you’re saving (as painful as it is) at least you’re still saving money that without the app you may never have saved. I mean what’s ~£24 a year in the grand scheme of £1,000 saved.
It’s a slow process. Round ups are pennies. No matter how much you’re using your debit card, your change will not be enormous so don’t expect massive interest in your first year of using the app. It will take time, but eventually the pennies should add up. Also remember it is stocks and shares which should always be considered as long term savings (+ 5 years). Plus if you want to increase it significantly, you can always just add more than your weekly round up to the pot.
Your capital is at risk. Whether £1 or a milli, if you invest in stocks and shares your money is at risk. The important thing to remember is you never make a loss until you sell. This applies to any stocks and shares account you may have. So don’t panic if you see the value of your portfolio going down, be patient and ride it out. Whatever goes down, will most definitely come back up.
Conclusion – should you download?
Would I recommend the app? Yes I would, especially if you’re new to investing. I think it’s an easy way to get in the habit of saving for a very rainy day and proves you don’t have to have large sums of money to start investing in stocks and shares. I watched a recent Breakfast Club interview where they discussed good savings habits and the interviewee recommended a similar micro-investing app in the USA called Acorns. She said she had her 13 year old son use it and through round ups has saved $3,000! Now that’s a good piggy bank.
“If you set aside $5 every couple of days, you would have set aside $1,000 by the end of the year” – Acorns website.
*If you’re nervous about the security of it, all these financial apps are regulated for their security and it’s in their better interest to protect you the customer than try and empty your bank account as part of 419. Not impossible though, so ask me again in a year if I still have my money.
Please also be assured the above information provided does not in any way constitute as an investment recommendation. We advise anyone interested in the above products and services to read through their terms and conditions thoroughly and contact a financial advisor before making an investment decision regarding the products and services.