Author Topic: Digit - Automated Savings  (Read 5838 times)

SoCal Spartan

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Digit - Automated Savings
« on: January 23, 2015, 01:25:28 PM »
Hello fellow Mustachians! I came across an article on Lifehacker this morning about a new service/company called Digit:

Basically, you link your checking account to their service after which it analyzes your past spending and income. It then calculates how much more you could be saving on a daily basis and automatically transfers that amount into an FDIC account. You can track your savings and transfer it back to your account at any time. You can also pause the savings transfers or cancel your account at anytime. And the best part is it's FREE!

I just signed up myself and am interested to see how much more I could be saving on a day-to-day basis. Even if I don't continue to use their service, it will at least give me more motivation to boost my savings in the future once I see how much more I could be doing!

Check it out at the link below:

https://digit.co/r/Q68ud


*Disclaimer: I am in no way affiliated with Digit but will get a nice little $5 bonus for everyone who signs up using the link!
« Last Edit: January 23, 2015, 01:28:13 PM by SoCal Spartan »

BarkyardBQ

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Re: Digit - Automated Savings
« Reply #1 on: January 23, 2015, 01:54:01 PM »
A savings account that doesn't advertise an interest rate?

If this can analyze your spending and remove fractions from your account, then couldn't you analyze your spending and automate savings on payday to a brokerage account? Maybe this could help you figure out how much you can save every month, and then show you that you could cancel Digit, and invest that money every month. Or transfer the extra from Digit to an Investment every month.

A passive approach to something that would benefit from more active attention. If it helps you, then by all means it's a great start. But this is comparable to things like BOA's round up savings or that other site that does round up savings for you.
« Last Edit: January 23, 2015, 03:21:35 PM by zdravé »

SoCal Spartan

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Re: Digit - Automated Savings
« Reply #2 on: January 23, 2015, 02:09:12 PM »
Zdrave - That's probably how I will end up using their system. I'm initially interested to see what it finds I could be saving over the course of a month or so. Since my income and spending should remain relatively the same from month-to-month, I can take the extra savings Digit finds and begin saving that amount on my own however I see fit.

Myself and other mustachians are probably not their target demographic as most have a handle on their savings to some extent. But it is a nice tool to use in the short term to show where I could be improving and by how much.

jmusic

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Re: Digit - Automated Savings
« Reply #3 on: January 23, 2015, 04:18:54 PM »
Woohoo!  I can shuffle $1000 back and forth from checking to savings accounts, netting me an extra $.25 per YEAR with current interest rates!

caliq

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Re: Digit - Automated Savings
« Reply #4 on: January 23, 2015, 04:23:59 PM »
Woohoo!  I can shuffle $1000 back and forth from checking to savings accounts, netting me an extra $.25 per YEAR with current interest rates!

I think the idea would be that you would not keep the saving sit picks up in the savings account -- you'd invest it?

SoCal Spartan

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Re: Digit - Automated Savings
« Reply #5 on: January 23, 2015, 04:43:32 PM »
Woohoo!  I can shuffle $1000 back and forth from checking to savings accounts, netting me an extra $.25 per YEAR with current interest rates!

I'm surprised by the negativity towards this...

I'm not saying you should let the transferred money sit in the Digit account earning no interest. It's simply an automated system that allows you to get a better idea of how much more you could be saving without it having much or any impact on your budget and with little to no effort on your part.

Like I said, most people here have their budgets in order with every last penny accounted for month to month. But I wanted to share this for anyone who might be interested in seeing if there's any room for improvement in their savings.

I signed up today so it may or may not be beneficial. But there is also no risk and loss given that I earn .002% or whatever it is on my checking account balance and can cancel any time with an initial cost of FREE.

SoCal Spartan

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Re: Digit - Automated Savings
« Reply #6 on: January 23, 2015, 04:52:35 PM »
This is an hilariously anti-Mustachian service.

For starters, according to their website, their "savings account" pays no interest at all. But not to worry, they "plan to offer ways to get a return on your savings in the future". In other words, there's actually no reason to use this service at all versus keeping money in your checking account.

Secondly, who actually engages in transactions in their checking account on a regular basis? Mustachians would be paying for things by credit card, and only paying the bill in full once per month. So an algorithm transferring money based on daily checking account activity doesn't make any sense.

Third, according to the "How it Works" page, they transfer $5 to $50 per day, but only if you can afford it! Fifty dollars per day is only $18,250 per year, a pretty meagre amount of savings.

What a scam of a product.

Can you share the high interest checking account you use with me? I'd love to get in on that. Especially if it has 5-10 hoops to jump through each month to get that additional 1% or so.

To your second point, what account do you use to pay your credit card each month? It tracks your spending habits so whether you're using your credit card or checking account to make purchases, odds are you are paying off your credit card using your checking account. It's not a tool meant for detailed purchase history in select categories.

Your third point... not sure if serious...

AGAIN, I simply wanted to share this as an automated tool people could try to see if there was any room for improvement in their current savings plan.

johnny847

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Re: Digit - Automated Savings
« Reply #7 on: January 23, 2015, 04:58:09 PM »
Or you could just use YNAB to figure out how much money you have left over every month to sock away at debt or investments

BarkyardBQ

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Re: Digit - Automated Savings
« Reply #8 on: January 23, 2015, 05:18:27 PM »
Secondly, who actually engages in transactions in their checking account on a regular basis? Mustachians would be paying for things by credit card, and only paying the bill in full once per month. So an algorithm transferring money based on daily checking account activity doesn't make any sense.

Had not even thought about that! Payday comes in, leaves just enough for expenses and that's it. Looking at my transactions now...

Paycheck
CC Payment
Transfer
CC Payment
repeat

The only change it would find is what we don't end up spending on the CC, which becomes another transfer to Vanguard. So I'd probably have to go into Digit and send the money back to Checking so I could 0 it out to Vanguard at the end of the month.
« Last Edit: January 23, 2015, 05:22:03 PM by zdravé »

SoCal Spartan

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Re: Digit - Automated Savings
« Reply #9 on: January 23, 2015, 05:21:50 PM »
This is an hilariously anti-Mustachian service.

For starters, according to their website, their "savings account" pays no interest at all. But not to worry, they "plan to offer ways to get a return on your savings in the future". In other words, there's actually no reason to use this service at all versus keeping money in your checking account.

Secondly, who actually engages in transactions in their checking account on a regular basis? Mustachians would be paying for things by credit card, and only paying the bill in full once per month. So an algorithm transferring money based on daily checking account activity doesn't make any sense.

Third, according to the "How it Works" page, they transfer $5 to $50 per day, but only if you can afford it! Fifty dollars per day is only $18,250 per year, a pretty meagre amount of savings.

What a scam of a product.

Can you share the high interest checking account you use with me? I'd love to get in on that. Especially if it has 5-10 hoops to jump through each month to get that additional 1% or so.

I keep my money in actual investments, not in bank accounts. Bank accounts are for current transactions like paying credit card bills or utilities or transferring money around. They are not instruments for building wealth, at least not in 2015. Most (though not all) of my money is in equities.

The tool is clearly a scam.

Thank you for proving my point. So to answer your initial question of "who actually engages in transactions in their checking account on a regular basis?" You do. And most everyone else.

Also, when I refer to 'savings' I don't literally mean whatever extra money it comes up with should go directly into a traditional savings account. It can go towards debts, stocks, equites, retirement, etc.

And yes, you could use YNAB and I whole heartedly believe everyone should (I almost worked for them, as an aside). BUT, not everyone wants to or even knows how to take the time, energy or effort involved to track all their spending and work out their budget manually from month to month.

It helps show people who might not want to or even know where to begin how much they could saving with almost no effort on the part of the user. For doing so, they take the interest earned on the money they transfer for you. For me, it's worth losing the 5 cents I might have earned in interest on that money to show me I could be saving and extra $20, $30 or $400 a month.

It's not likely it will offer much benefit to mustachians who have their spending and savings tightly managed. But for those who have no plan or put no thought into what they could be saving instead of sitting in their checking account, it could make a big difference.

Believe it or not, not everyones situation and spending habits are the same as Cathy and zdrave.

BarkyardBQ

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Re: Digit - Automated Savings
« Reply #10 on: January 23, 2015, 05:25:40 PM »
I'm not trying to insult anyone's progress or the steps they take, I applaud any and all efforts made. But it should be realized that siphoning off this 'change' from a checking account should be used as a tool to show people how much they can save, and then invest into higher growth investments.

Likewise, if the money saved each month isn't relatively close to the previous month, it could possibly help identify overspending in certain areas.

But a budget would help to simplify the entire process.
« Last Edit: January 23, 2015, 05:34:11 PM by zdravé »

SoCal Spartan

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Re: Digit - Automated Savings
« Reply #11 on: January 23, 2015, 06:51:30 PM »
I agree, zdrave. I'm hoping they actually do make an effort to educate their users how that money can be better utilized by saving or investing and not just promote the use of their 'savings' account.

This is a tool to be utilized by a beginner to the world of saving and investing that when combined with other tools like Mint & YNAB could have a big impact on a budget.

For me, I'm using it short-term for fun over the course of a month or so mainly to see if I should be keeping even less in my checking account from month to month based on the historical spending vs. income data it finds. I like to keep a buffer in checking for 'just in case', but maybe I don't need quite as big a buffer.

r3dt4rget

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Re: Digit - Automated Savings
« Reply #12 on: January 23, 2015, 07:38:39 PM »
The concept of automated saving is neat on paper, but doesn't work in the real world. It's different if you set up automatic transfers to an investment account, I'm talking about cash savings that is easily accessible.

Bank of America has this "Keep the Change" feature on checking accounts, where you can have every purchase rounded up to the nearest dollar. Then they would transfer the "change" to your savings account. A lot of money did accumulate because of this feature, and I really didn't notice the money gone. But after the money in the savings account accumulated significantly I would just transfer it back to my checking and spend it.

My point is that if you don't have the discipline and organization to save on your own, you will most likely just end up saving and then spending your digit account. I guess thats ok if you like spending money on stuff, but it doesn't really help out your finances.