Personality clashes, smokers, stinkers, halitosis, catching colds, and getting up at ridiculous hours are the things you can look forward to if you carpool. On the positive side, you can also look forward to the occasional worry-free commute, getting to work faster through carpool lanes, meeting new friends, and best of all, saving a lot of money. How about you? Do you carpool?
I've only ever carpooled for one period in my life, but the amount of money I saved was amazing. I was fortunate, too, because my ride was a heck of a nice guy (and never smelled bad). In fact, he was a pleasure to commute with.
This was back when gas was less than half of what it is now. If I remember correctly, he only charged me a couple of dollars a day, at the end of each week. I didn't have a car until a bit later, and the increased cost of the car was pronounced, compared to car pooling.
But of course, a car is convenient, and some families cannot do without one. So car-pooling with several people who will share the driving duties is often a nice alternative. The reduction of the wear-and-tear on your car and, in some cases, the lower road toll fees adds up over time. You probaby won't save anything on car insurance, but there's the tangible savings in gasoline and parking costs, which could be several thousand a year.
It's hard to give a good example, because there are so many options, and so many arrangements for sharing the carpooling costs. And wear-and-tear savings are rather intangible. But let's say that you're splitting gas and parking costs with three other people, five days per week. (The example below is just that - an example. Substitute your own details in.)
Suppose parking costs $10/day (it's like that in big cities, often more). Gas varies, but say it costs $3/gal. If you're getting 25 miles/gal (in all cars used in your car pool), and it's 25 miles one way to work, then gas is about $6/day. That's $16/day that you'd normally spend, which you're now sharing with three other people. So, your cost now drops to $16/4 = $4/day.
You're saving 75% of your commuting costs. What can you do with an extra $12/day? That's 5 d/wk x $12/d = $60/wk or roughly $240/mth, when you factor in about 2 weeks of paid holidays and 2 weeks of legal holidays. Throw $240/m into an online savings bank such as Emigrant Direct or Ing Direct. Or let's be conservative and say that you're earning about 4.25% APY (based on monthly compounding) somewhere in an online savings account.
That monthly contribution of $240 becomes nearly $3000 in one year. It's hard to measure, but if you added an extra $60/m for wear-and-tear savings, $300/month gives you nearly $3700 in one year. And remember, that's in after-tax dollars. Depending on your tax bracket, that might be like getting a four or five thousand dollar raise.
Now it's only about $65 in interest, but it does add up over time and compound interest. And it's as much about developing a savings discipline as just saving and getting interest. If you catch the savings bug, you could add a bit more money in each month and save even more. For young couples without a home, a decade might help you save the down payment for a house.
When you calculate your own savings, keep in mind that APY, or Annual Percent Yield, refers to a rate that has already been compounded. Some banks compound on daily balances, some on monthly. The above example assumes the latter. So if you've selected a bank that compounds daily, you're going to have a fraction more savings, which will add up over the years.
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