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Over the past few years, a number of personal finance apps have popped into the market – and our phone screens – and as a personal finance reporter many of them have caught my eye. But I’m not the type to download anything without doing my research and reading the reviews. So when I finally decided to go ahead and download the Digit app, I knew I was making an informed decision.
Digit is an app that encourages people to save more money. It logs into your checking account and automatically saves small random amounts of money that it holds in a savings account until you decide what to do with it. You can use the app to create as many savings compartments as you want (think: emergency fund, vacation, dog, down payment for the house, etc.), and the app will direct your money on a daily basis. current account to your savings compartments. In other words, you save money without lifting a finger.
You can even set a limit on the amount of money withdrawn from your checking account on any given day, so that you don’t save too much and don’t have enough money to cover your expenses. You can also pause and re-activate the automatic savings feature, which can come in handy if your checking account is getting dangerously low and you don’t want to end up hitting negative numbers. There is also an overdraft protection feature where Digit will not transfer money from your check to your savings if it forces you to overdraft your account.
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Why I downloaded Digit for the first time
There were a bunch of little things I was using Digit to save for like a security deposit on an apartment, a celebration for my 26th birthday, Christmas presents, and a real estate investment that I hope to make in the future. (we speak years from now on). I didn’t want to put the money for all of these goals in one savings account – I’m more of a visual learner and like to see my goals separate but organized. So I was really drawn to the savings compartment function.
And since I was just starting my financial wellness journey at the time, I also loved the idea of being able to muster as much savings as possible without having to do anything to figure out how much I could really afford. save every month.
But after a year on the app and saving thousands of dollars, I realized I had reached a point where the app no longer matched my financial habits. Here is why I decided to unplug Digit.
1. I switched to zero-based budgeting
Zero-based budgeting – where you use every dollar you earn for spending and saving – is one of my biggest strategies for building wealth. This allows me to give every dollar a job so that I make sure that every one of my paychecks is completely used up on expenses and savings with nothing left for mindless spending.
Of course, there are several ways to create a plan for using your money. Some people opt for creating detailed spreadsheets while others can use the budgeting features on apps like Personal Capital or Mint. Zero-based budgeting personally works best for me.
Since I spent time making an allocation plan for every dollar, I found that I didn’t really need Digit’s random autosave anymore. I already knew exactly how much money I needed to invest to save for each goal and invest in my brokerage account. For this reason, there was no more room for Digit to work its magic.
So I decided to suspend the automatic savings feature in May and kept it.
2. It’s not the best savings account
Most high yield savings accounts currently offer a 0.5% APY, but Digit only offers a 0.1% APY (at the time of writing) which is paid quarterly, meaning that I wasn’t earning much on my balance.
Of course, there isn’t a huge difference between 0.5% and 0.1%, and I’m not going to get rich leaving my money in a savings account. But it would be nice if Digit offered similar rates to other high yield savings accounts.
I decided that my money would be better placed in an Ally Online High Yield Savings Account, so that I could take advantage of the higher APY. Additionally, Ally also uses a similar savings bucket format that allows users to save towards specific goals.
I really like the compartments feature because I like to see my savings separated by goal. And while this was initially a huge draw for me when it comes to the Digit app, it made more sense to move my money to an app with similar functionality but more potential to earn interest.
3. I was still paying for the app but not using the features
New Digit customers can get a 30-day free trial when they first sign up. But after that, it costs $ 5 per month to keep using the app. At first I thought it was worth it as using the app’s auto-savings feature allowed me to contribute a lot more money to my goals on autopilot each month. Basically, I was paying for the convenience of not having to decide when and how much to save for those small goals.
But over time, and I made the decision to turn off the automatic savings setting and manually move my money into each bucket, I started to feel like the $ 5 a month was a waste. It was an expense I decided to make, so it was time to cancel the app.
Who should consider using Digit?
Annual percentage return (APY)
Start earning 0.10% APY after using the app for three consecutive months
The minimum balance
30-day free trial; $ 5 / month
Maximum number of transactions
Excessive transaction fees
Offer a checking account?
Offer an ATM card?
Even though I no longer use Digit, I still love the idea of the app. From the first time I heard about it, I thought that automatically saving small random amounts of money each day was such a smart way to help users reach their savings goals. successfully – and I still think that’s a great idea.
Setting up automatic savings allows us to overcome current prejudices, which often prevent us from making important long-term decisions for our future selves, as we are inclined to please our present selves. When it comes to our money, we can choose to spend now to satisfy our current desires rather than saving for longer term goals like that down payment or a car.
Digit’s features help users overcome this bias. By putting money on autopilot, you don’t give yourself a choice between spending and saving. At the same time, you can customize the app to save smaller, less intimidating amounts of money that you might barely notice if you’re saving for a goal several years from now.
While the Digit app has taken its course for me, it can still be useful for those new to creating and saving for financial goals, such as students, young adults, and anyone who just wants to start a new one. financial trip. It’s also good for anyone who needs a little help balancing their spending and savings.
As for me, I am delighted to continue tinkering with my zero-based budget. The $ 5 I spent on my monthly Digit subscription has been reallocated to my Christmas gift savings basket, so now I’m a little closer to giving my loved ones the gifts they really want this year.
Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.