Do you think saving all of your spare change constitutes saving money? If you do, you may have fallen into the money jar trap. We explore why placing your extra coins in a jar might be losing you money and some better alternatives for saving small amounts.
Lots of people still place their spare change into a jar or bank every night when they return home, thinking they are saving money.
In reality, the dynamics of saving coins have changed. By placing your extra coins in a jar, you may actually be losing money. This is called the money jar trap.
Saving Coins Once Made Financial Sense
The money jar has been a traditional way to save money for generations. The concept is straightforward.
After coming home for the day, you empty your pockets or the coin compartment of your wallet and put the coins into a jar. When the jar is full, you take it to your local bank, have the coins counted, and place the money into your savings account.
While this sounds simple enough, today, the coins saved in the jar may not be worth their face value when redeemed. Read on to find out why.
The Cost of Cashing in Those Coins
The problem with the money jar game is that banks and other enterprises have figured out that they can charge individuals for taking their change. While this would have been thought absurd years ago, it is common practice today.
If there is a way to make a buck, you can be sure that banks and others will try to take it.
Coinstar Machines
Take the convenience of changing your coins at a grocery store. Coinstar will take your change and give you a receipt that you can exchange for cash, but usethey’ll also take a fee to do so.In effect, you are trading the face value of your coins for something worth less than face value.
Some Coinstar machines offer gift cards to specific merchants at face value (the merchants pay Coinstar a fee to have their gift cards in the machine), which means that you don’t lose money, but you lose in another way. Unlike cash, you are limited to purchasing goods at the particular store of the gift card you receive.
Bank
Few banks still accept large amounts of coins and many of those that do charge a fee. Even if you roll them, most banks will not accept more than a teller can reasonably and quickly count by hand.
What this all comes down to is that for many, keeping a coin jar is the same as losing money. Where it once was a great way to add to your savings, it often can be as wasteful as keeping a balance on your credit cards.
We have come to a time when the coin jar can cost you more money than you save.
How To Stop Losing Money and Start Saving
There are a few steps that you can take to make sure that you aren’t losing money when you think you are saving it.
1. Avoid store coin-counting machines.
You want to make sure never to have your coins changed at machines inside a grocery or similar store. By doing so, you will automatically have around 10% or more of your money subtracted for fees.
2. Don’t let your bank charge you for cashing in coins.
Before you take your coins to your bank, make sure they accept them and don’t charge any fees for taking the money.
The policy for changing coins at banks varies widely. Some will charge for loose coins but won’t charge if you roll the coins yourself.
Credit unions are usually better at not charging fees for taking coins than banks but they typically only provide this service for members.
3. Spend the coins…on needs, not wants.
If you can’t find a bank that will take coins without charging you, use the coins in your everyday use. You’re much better off doing this than letting them sit in a jar where they will ultimately lose money for you.
You can amend the money jar game to benefit your savings if this is the case.
4. Save bills instead of coins.
Instead of saving coins, move up to $1 bills for your money jar. In this scenario, you’ll be doing exactly what you have been doing, but you’ll be saving $1 bills instead of change. You don’t spend any $1 bills you receive, but any coins you receive are fine to use. That means all purchases have to be made with coins or large bills ($5, $10, or $20 bills).
Place all your $1 bills into your savings jar at the end of each day. Since banks will not charge you anything to deposit $1 bills, you avoid the fees you would get for the change and save even more money than with coins.
5. Try a digital alternative.
For those who rarely carry cash or find coin saving impractical, digital saving tools offer convenient alternatives. Here are some tips on how to “save coins” digitally:
- Round-Up Apps: Many banking apps now offer features that automatically round up your transactions to the nearest dollar and save the difference. For instance, if you spend $3.75 on a coffee, the app rounds it up to $4.00 and puts the $0.25 into savings.
- Automatic Savings Plans: Set up an automatic transfer from your checking account to a savings account each month. Even small amounts, like $5 or $10, can build up without you having to think about it.
- Cashback Apps and Credit Cards: Utilize cashback apps and credit cards that offer rewards on purchases. The cashback accumulated can be directed into a savings account, mimicking the effect of saving coins but with potentially higher value.
- Investment Apps: Some apps, such as Stash or Acorns, allow you to invest small amounts in stocks or bonds, which can be a more productive use of what would have been ‘coin money.’ This approach not only saves money but potentially grows it over time.
In the end, it’s important to remember that coins are legal currency, and you can get full face value for them by spending them a little at a time. While a large number of coins can be troublesome, there is no reason to pay a fee to have the coins deposited.
