Ten percent savings doesn’t seem like a lot and depending on the amount you apply the savings to, it may not be a lot. I often scoff at retail stores when they offer a 20% (or less) off sale for whatever material goods they sell.

Really? You’re going to give me 20% off that $20 shirt? Thanks for allowing me to save $4!

I mock these sales, not because of the miniscule savings, but because you’re not saving anything if you’re spending. But alas, that is not what this is about. editor’s note: I’m not even sure if that is the proper use of the word alas, but alas I’m using it!

I recently logged into my auto insurance account to make sure my address change had gone through. It was also coming close to the end of my 6-month policy so it was renewal time. I’ve always been a monthly payment kinda guy for my auto insurance, but something caught my eye this time. I could pay my 6 month policy in full for almost 10% less than if I was to make my monthly payments!

I thought about it for a few days. I had the money in my savings account. My savings account is earning a measly 1.4%, which is still one of the highest rates, but definitely not the 3-4% I was getting before this economic meltdown.

Since I could basically earn 8% on paying in full, I paid the entire bill. But, you ask, what about when your next renewal comes due. Are you going to just keep withdrawing from your savings, eventually leaving you with nothing?

No, my friend, I have a plan. My monthly payments were paid automatically on the 27th of each month. I still make these payments. No, not to the insurance company. I pay myself. I send the payment I would have had into my savings account. That money will be used to make the next 6 month renewal payment. And I’ll make a little extra money, about $10, each time I make the transfer from checking to savings.

So why wouldn’t you want to do this?

Well if all the money you have in your savings account would be the entire renewal payment, don’t do it. As a champion of savings, I recommend you have at least one month’s of expenses in your savings account before doing this.

Also you’re insurance company may not even offer such a great discount for paying in full. My old insurance company, *cough State Farm cough*, didn’t offer a discount for paying in full. The only difference was that I wouldn’t pay a $1 monthly installment plan fee. That was still about a 1% savings, but not really worth it to me.