Every month I’m forced to participate in a back-and-forth struggle between my checking and savings account in an attempt to save money and avoid being overcharged by my bank.
Admittedly, I’d benefit from embracing a forced savings plan, so I decided to turn to mobile apps Digit and Acorns, two relatively new services that promise to help people save money by automating their finances. Both apps work by automatically transferring cash from a checking to a savings account throughout the month.
Digit takes a novel approach to helping you save money. After signing up for a Digit account, you’re asked to connect your checking account to the app so it can analyze your spending habits, bills and deposits. The app currently supports 2,500 different banks and credit unions within the U.S., with plans to expand internationally.
Once armed with your financial information, the company determines how much money you can afford to safely transfer into a savings account every two to three days. After two months with the service, my withdrawals have ranged from $3.50 to $75.19 with the average transfer occurring every 1.8 days.
Another benefit for those who sign on with app is that it allows members to interact with the service through text messages instead of smartphone applications. This seemingly insignificant fact means regardless of your mobile platform you’re able to save money wherever and whenever you want.
Every morning I receive a text message from Digit with my checking account balance, how much it changed from the previous day, and given the option to view a list of my recent transactions. I also can pause withdrawals, ask Digit to be more or less aggressive with its savings plan, transfer money to Digit, and—most importantly—transfer money from Digit back to my checking account using text message commands.
Digit is free to use, making its profit by collecting any interest earned on your account. Basically, the app creates a savings account for its members and instead of giving them a quarterly interest payment, keeps the money as its fee.
Acorns differentiates itself from the competition through its mobile application (available to Android and iOS users) and unusual methodology.
Instead of using complex analytics to determine your ideal savings amount, Acorns rounds up every purchase to the nearest dollar and transfers the remaining difference from your checking account to your Acorns savings account. For example, a purchase of $102.32 will result in Acorns transferring $0.68.
The funds in your savings account are then invested into one of five varying portfolios ranging from moderate to aggressive, which you can select and customize from your mobile device. The app also lets members transfer money back to their checking account using the Acorns application.
In the roughly six weeks I’ve been using Acorns, it’s transferred just over $100 out of my checking account. I’ve earned $0.63 based on my portfolio selection of moderately aggressive, for a total of $100.92 saved.
Acorns charges $1 per month for accounts with a balance under $5,000 and 0.25 percent per year for accounts over that threshold.
Which one is better?
Naturally, handing over your bank account information to two unfamiliar websites should raise security and privacy questions. Both Digit and Acrons use encryption to keep your information safe and are SIPC or FDIC insured.
If I had to pick just one service to use, and eventually I will, I’d choose Digit because it’s more aggressive at saving money on my behalf. Its savings strategy combined with the fact that it’s not subject to a financial portfolio—which is required when you use Acorns—makes it a leader in my book.