Rewards programs don't save you money

My daughter loves rewards programs as much as I do. While I tend to give the gift cards outright as holiday presents, Abby uses them to buy gifts for the folks on her list.

A frugalist's dream: Free presents! Think of all the money she's saving, right?

Not really.

"It's more a case of 'not spending' as opposed to 'saving.' Chances are (those) funds will still get sucked up in the whirlwind of random expenses that is life," she writes in this post on I Pick Up Pennies.

 

"To truly save money, it has to be . . . well . . . saved. Put away. Not spent."

Know anyone who actually does that?

Or do relatives and friends just talk about how much they "saved" by cashing in points from a rewards credit card or a program like Bing, MyPoints or Swagbucks?

 

People also love to brag about Black Friday/Cyber Monday "savings." But can they actually point to where that money is?

Most shoppers didn't save money, Abby says: "They repurposed it."

True savings
A simple tactic lets her avoid this consumer disconnect: Whenever Abby spends rewards points, she transfers their cash equivalent from checking into an online bank account.

Now that's saving.

If you really want to benefit from rewards programs, get in the habit of transferring the gift card amounts -- right away! -- out of your general budget and into an account where they can't be touched.

Ditto with anything you bought for yourself or your household during the recent sales. BF/CM As I noted in "A year's worth of gifts at rock-bottom prices," taking advantage of low prices is great if you needed to buy new towels or a stove.

But be sure to set aside the difference between what you'd planned to spend and what you did spend. If you don't, the money will just melt into your checking account -- and eventually flow back out.

A dedicated account is a psychological boost, i.e., you can watch your savings grow toward a goal. For Abby and her husband, it's the emergency fund. Your own account might be called something like "pay cash for next car" or "down payment on a home."

No matter what your goal, keep repeating this mantra: It's not savings unless you save it.

More on MSN Money:

• What keeps you from saving?
• Prepaid cards are not gift cards
• Holiday shopping? Avoid this retail trick
• Best credit cards for holiday shopping