Over the last month, I’ve been testing out a savings tool from a company called Digit. I test a lot of financial tools. Many times, they aren’t very exciting and not worth sharing. In this case, I’ve been very impressed by the results… hence the exclamation point in the title.
Digit squirrels away money from a savings or checking account. It analyzes your account balance, spending, upcoming income, and upcoming bills to figure out how much it can safely move.
Personal finance experts may already know why this is an awesome thing. The average person may not.
The concept is as simple as “out of sight, out of mind.” If you don’t have money in that savings/checking account, you aren’t going to spend it. Digit sneaks a little bit away and honestly, I didn’t notice it. Here’s how much money it moved for me since March 2nd when I joined:
At this rate, it will hide around $2000 a year for me. That’s a nice rainy day fund for some, right?
If I haven’t been clear, I should say that Digit doesn’t save you money in the sense that you have more of it to spend or that it buys more goods or services. It saves you money by hiding it sends a psychological trigger not to spend money you don’t have.
You see lottery winners and sports stars spend all their money in a rush. I bet they think they feel like they have an infinite amount of money. Except that it goes quickly and they end up with nothing. This is like the opposite. You think you have less money, so you save it. And when the rain day comes, you have something there and waiting.
As a blogger, my income is very irregular. Over the span of a month it is somewhat predictable and over 3-4 months it is very predictable. However, day to day, it is very unpredictable.
This is where Digit really shined for me. For one week, my income coming in fast and furious. Digit adjusted to siphon off more than $100 in a week. Some simple math will tell you that it moved around $50 the rest of the month of the trial, not a particularly big deal. It was just what I would have wanted considering the income I had coming in and expenses coming up at the end of the month.
There are a couple of natural questions to ask.
One might be, “where is my money held?” The answer is in the company FAQ. It is held in a custodial account at Wells Fargo and is FDIC insured. Seems safe to me.
Another question might be, “how much interest do I earn?” You don’t earn interest. That’s definitely a downside, but considering the interest rates on savings/checking accounts is close to zero, I can’t be too hard on Digit. I’m thinking about regularly clearing out the account every 2-3 months to put it in something that earns interest.
At the end of the day, you might be able to do something similar with some bank accounts you already have set-up. You could set up 10 transfers a month of $10 or even a big transfer once a month. I’ve done that myself in the past, but I had gotten away from it when I needed to use the money. I feel like this will stick since it is smaller and not a set of transfers that I set up myself.
One unexpected bonus is that I can manage my bank account balances via SMS on my phone. I originally thought this was weird, but getting a daily update about how much is in the account pushed to me is better than having to actively look it up myself. It is also very easy to do simple transfers, which was a surprise.
I can’t think of a solid reason why anyone would not use Digit, even if they are putting small chunks away. Some of my savings have been as low as $1.26, the kind of money that I hope most people wouldn’t miss.
What do you think? Let me know in the comments.