There’s a new trend amongst app-using folks wanting to Do Better With Money, the idea of automatically investing small amounts of money on a very frequent basis. For example, when you make a purchase and pay with your debit card, an app would round the purchase up to the nearest dollar and deposit the difference into an investment. Literally pennies or nickels at a time, potentially multiple times a day and you don’t even have to think about it. Sound good, right? At least it’s something towards retirement…

Micro investing yields micro results.  While it sounds good, and it isn’t bad necessarily, you run the risk of thinking you’re actually doing something and getting too lax about saving for retirement or funding your kid’s college. You should instead be very intentional about it, know what the steps of your plan are, and execute them in the proper order.

Your goal for investing for retirement should be to put away 15% of your gross household income into tax-favored accounts for many years. Most people don’t even think it’s possible to save that much of their income, because so much of their income is already scarfed up by student loan payments, car payments, credit card payments – debt. That’s why Baby Step 2 is to get out of all consumer debt except your primary mortgage, Baby Step 3 is to build up a healthy Emergency Fund savings of 3-6 months of expenses, and THEN put away 15% of your income into retirement.

Given the average household income of $55,000, 15% of that is $687 a month. I don’t think any of us are making enough trips to the coffee shop to where micro investing will approach that!  So get yourself on a budget, get out and stay out of debt, and get to building some real wealth for your family.