Keep Your "Keep the Change"

I am convinced that the average person has no understanding whatsoever of finances. One contemporary point of evidence is a program offered by Bank of America called "Keep the Change".

"Keep the Change" is a program which is billed as a savings plan. The basic idea is that every time you make a purchase with their debit card, the program "saves" the change of your purchase by rounding up to the next dollar. For example, if you make a purchase for $1.25, the 75 cents "change" is "saved".

At first it sounds like you get something for nothing. In fact, I had to listen to the commercial a couple of times before it made sense. As it turns out, the reason why I didn't understand it is because I found it difficult to believe that the truth was as stupid as it first sounded.

But alas, it is that stupid. When you make that $1.25 purchase, $2 is taken from your checking account. $1.25 goes to pay for the purchase; the remaining 75 cents is transferred to your savings account. This is what passes for a savings plan in a consumer society. It's all your money, they just move pennies from one account to another.

The truly sinister part of the plan is that it creates a mindset that spending results in saving. Spending and saving are, in fact, opposites. One depletes your bank account, the other adds to it. By tying the two together, it plants the idea in people's minds that they are doing something good for their bank account by spending from it. While it may help rationalize a questionable purchase, it will do little to save any real money. The most that can be saved is 99 cents on a purchase, no matter how much money you blow. While I have no statistics (Dammit Jim, I'm an engineer, not a statistician!) I bet the net result for a lot of people is that they spend more money. No matter how many pennies move into your savings account, if you spend more money, you are NOT saving.

I have a savings plan too. What it lacks in marketing zing it makes up for in it's simplicity: Put money in your savings account. Don't spend it.

(Read here for more details on the program. It is very slightly better than I described. Very slightly)