Update 4/11/17: Digit is no longer free to use. It now charges $2.99 per month — so just up your automated savings yourself and avoid getting charged to save your own money.
Medium-term savings goals: frankly, these should be all the rage right now for millennials. We constantly hear reporters and financial gurus harping about retirement, emergency funds and paying down student loans. All valid topics to be harping on, but the intense focus on these are to the detriment of other life milestones: buying a home, paying for a wedding, having children, traveling.
In order to reach my rather lofty goals (which I’ll share at a later date), I’ve been looking for every opportunity to save money. Well, let’s rephrase that. I’ve been looking for ways to increase how I save. I still indulge in travel (I’ve been to Texas, North Carolina, and upstate New York in February alone and heading to California and Hawaii in March). I’ve gone to the movies (and actually paid full price * gasp*). You know what, I’ll just confess it all: I’ve even bought my lunch instead of brown bagging, purchased a few lattes and gone out to dinner (more than once!).
The theatrics aside, I legitimately have been figuring out ways to trim the fat in my budget and put more money towards my medium-term goals.
The easiest way to scale back how much you spend is by simply reducing the amount of accessible money. The out of sight out of mind mentality is great when it comes to saving (as long as you do check ups on your investments). I put my money in savings or investments and then put a mental block on spending it. The only money I’m allowed to spend is the money in my checking account.
Courtesy of J. Money, I recently discovered a new way to put my money out of sight: Digit.
Digit is your free robotic financial advisor. You link Digit to your checking account, it analyzes your spending and then begins pulling out small amounts of money to put into savings. In my experience, Digit takes small sums of money out. It’s like having a budget leak that works for you instead of against you.
Digit functions as a savings account and holds your money until you request to have it transferred back into your bank (or credit union) account. In my opinion, Digit is really is more of a checking account because you don’t earn any interest on your funds and there are unlimited transfers – savings accounts are subjected to a maximum of six transfers a month. Regardless, it’s a great way for you to be saving without really noticing you’re saving.
COMMUNICATING WITH DIGIT
You can access your Digit account online, but I personally love how it communicates via texts. I receive a daily update with the amount in my checking account, which will mention if Digit saved any money that day and occasionally how much I have saved total. You can also cash out, pause transfers and ask about updates all via text message.
HOW MUCH DOES DIGIT TAKE?
My largest transfer was for $6.44. Of the eight transfers Digit has performed since I opened my account in late January, only three have been above a dollar. The average amount I’ve had transferred is $2.28.
I’ve had Digit for three weeks and it’s saved $18.25 for me. This doesn’t sound like much, but even just pulling $250 a year I likely wouldn’t have saved can fund a flight, help pay for the upkeep of this blog or get me closer to my medium-savings goals.
This will obviously vary between people. I don’t keep a bunch of money in checking, so Digit’s analysis of my income and how I spend isn’t totally accurate. Digit will have a better analysis if you tend to keep more in checking and make most of your transactions with a debit card linked to the account.
Note: Digit can link to over 2,500 banks and credit unions and it’s currently only US-based.
HOW DO I KNOW IT’S SAFE?
Digit uses the same type of encrypted security measures your bank does. It also is FDIC insured up to $250,000.
I’m completely paranoid about giving anyone or anything access to my financial life – and I trust Digit.
HOW IS DIGIT POSSIBLY FREE?
Well, they don’t offer you any interest on your savings. Digit is pocketing the interest being earned on your money.
WAIT, THEY DON’T GIVE ME INTEREST?
If that makes you made – then don’t use it. But be realistic. If you’re using any of the big four banks (Chase, Bank of America, Wells Fargo or Citi) to hold your savings – you earn a whopping 0.01% interest rate on savings. That’s $1 for $10,000 in savings. I’m willing to bet Digit would save you more than that in a year.
WHAT IF I WANT MY MONEY BACK?
You can withdraw whenever you want, as frequently as you want. This does make it different than a standard savings account, which limits you to six transactions per month.
Just text ‘Withdraw’ to Digit and your money will be in your checking account the next business day.
DIGIT MADE ME GO OVERDRAFT!
NOOO! Overdraft is the worst, especially if you bank with one of the Big Four and you get charged over $30 or $12 for overdraft “protection.” But don’t worry Digit has a no overdraft policy. If you end up going overdraft due to a transaction Digit made, it’ll pay the overdraft fee.
I CAN’T AFFORD TO SAVE THIS MONTH
Some months are tighter than others. That’s okay. You don’t have to deactivate Digit just because every penny makes a difference in your budget. You can just text ‘Pause’ or go online and hit ‘Pause Saving’ on your dashboard. Digit won’t take out money until you activate it again.
WHAT ARE YOU WAITING FOR?
It takes about 4 minutes to set Digit up*. Try it for a month and see how much it saves you. Maybe it’ll help kick start a fund to take a trip or pull together money to make an extra debt repayment. I know the money Digit saves me is going into my “Wedding Fund.” No – not mine. I’m 25 and averaging 4 weddings a year. Those suckers are expensive to attend – not to mention be in!
*Yes, if you click through my link to Digit, I’ll get a $5 referral fee. But then you can refer someone and make $5! We both win.