My daughter Anne has been asking me for a fish, which I told her she had to purchase out of her allowance (hey, I paid for the dog — which we adopted from another family who couldn’t take care of her, not a puppy mill). Anne had about $6 left in her piggy bank and needed $10.
We talked about her alternatives — waiting two weeks for her July allowance, or figuring out how to earn extra cash. She decided she liked the extra cash idea, so we brainstormed entrepreneurial possibilities. She just turned 12 and enjoys little kids, and there are dozens of them within a two-block radius, so babysitting looked like a slam dunk.
This in turn led to a discussion about the training one needs to be a successful babysitter/entrepreneur, so we signed her up for the Red Cross Babysitter’s Training course. Since I am always happy to pay for educational stuff, I wrote the tuition check for the all-day course. Bottom line: Instead of giving her $4 to pay for the fish, I spent $65. But as they say, give a kid $4 and they’ll get a fish today, teach a kid to babysit and they can buy fish forever. Or something like that.
Anyway, while she was in the pet store picking out Thursday — the name of her new fish — I was making a deposit at Wachovia. The teller asked if I wanted to sign up for the bank’s new program, Way2Save and receive guaranteed 5% interest on the account’s balance at the end of the first year. Since my online savings account has dropped to a paltry 1.5% I took the bait.
Thursday, the Betta fish
Alas, the fine print reveals that Way2Save is not smooth sailing to the riches of Atlantis, but may be helpful, especially for people who occasionally overdraw their checking accounts. And it might be a nice way to build up a mini emergency fund, or save for an annual vacation, especially if you’re one of those spontaneous types who books a cruise at the last minute and charges the excursion to a credit card.
Here’s how it works: You link the Way2Save account to your checking, and are allowed to make an automatic transfer of $100 a month. Then, for every purchase you make with your check card and every bill you pay online, the bank will transfer $1 from your checking to savings. (Wachovia aggregates the payment at the end of the day, and if it overdraws your account, the transaction does not go through.) There’s no minimum balance, and no initial deposit required.
You can opt to use Way2Save as overdraft protection, and Wachovia will waive its usual overdraft transfer fee when funds are swept from the savings to the checking account to prevent a bounced check. A convenient backup plan, as we all make mistakes. I also like that the Way2Save program encourages the use of online bill pay, because that’s a great way to get in the habit of paying bills on time (avoiding pesky late fees), and it saves you money on stamps.
In the fine print, however, you’ll find that the maximum Way2Save “bonus” is $300 — which means you don’t get anything if you put more than $500 a month, or $6,000 a year into the savings account (5% of $6,000 = $300.) That number would be hard to reach anyway, because you’d need 400 transactions on top of the $100 you’re allowed to transfer in directly. So, for instance, let’s say I transfer $100 a month, pay 10 bills a month online, and swipe my debit card five times a month. That equals a monthly Way2Save deposit of perhaps $115, or $1380 a year. Interest earned: $69, for a total of $1,449. (As I said, a nice little cushion for overdrafts, emergencies or vacations.)
It’s worthwhile to shop around for these savings programs. Bank of America offers one called Keep the Change, in which it rounds up the purchases you make with its check card to the nearest dollar, transfers that amount from checking to savings and matches the funds up to $250 a year. Imagine you buy a bagel and coffee for $1.40; the bank rounds it up to $2, transfers 60 cents to savings and then matches it with 60 cents. (Note: It matches 100% in the first three months and 5% in the next nine months. So that 60 cents round-up would only garner a match of 3 cents in the fourth month and beyond.)
Presumably you might reach $250 over the course of a year if you had enough transactions on your check card — but this also requires using your debit card like crazy. (Even the example on B of A’s website presumes you’re swiping that sucker 40 times in a month.) That may make it difficult to stay on top of your account balance — I’m one of those old fashioned people who writes down everything in my check register — and overdraft fees are at record highs. If you’re trying to control your spending, it’s better to use cash. One study found that people overspend by a two-to-one margin when they have the opportunity to use plastic versus the green stuff in their wallets.
Gotta a good tip for earning more interest on your savings? Comment here or email me at laura at laurarowley.com.