Change Your Change

Monday, May 12, 2008 | , | 0 comments »

Most people have a jar of change lying around in their house. This is money that should be saved in a bank account collecting interest. Instead it stays in a piggy bank or jar because it is change and cannot be easily deposited in the bank. Every dollar in that jar is losing you 3-4 cents of interest per year.

I once read an article in the about a guy who paid $30,000 for a new car using change. The guy had been collecting his change for over 10 years. The dealer who sold him the card accepted his change and had to get an armored car to transport the money to the bank.

I remember thinking to myself, “What an idiot!” Sure he might have thought that this was the best way to ensure that he saved money for a new car. Otherwise he might have just spent that money on something else instead. But the guy lost over $7,450 in compound interest over the 10 years that he was collecting his change. He could have bought a new car, and paid for many months of gas as well, if he had saved that money in a savings account.

Avoid Change

The best way is to avoid getting change. Use your cash back or rewards credit card. At places that do not accept credit cards, if you have a debit card that does not charge a transaction fee, use it. If you buy coffee often at Tim Hortons, or Starbucks, get a prepaid card. This does not mean that you should refuse your change. Ask for you change.

Spend Your Change

You should always spend it on what you need. The next time you are paying for a cup of coffee or groceries use your change. Say that the total come to $6.76. You could pay with a 5 dollar bill, 1 loonie, 2 quarters, 1 dime, 1 nickel and 6 pennies. You could also pay with a twenty dollar bill and 8 quarters, 3 nickels and 6 pennies. The combinations are many but no matter what you will get rid of your change.

Inevitably you are going to end up accumulating some change.

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Depositing Your Change