Most people mismanage their money in little ways that add up, thus convincing them that they don’t have the ability to save.
You buy the $5 coffees a couple of times a week, go out to eat, get depressed by the fact that it seems like you can never save and so you end up “splurging” on something to help deal with the frustration.
If you’re a poor budgeter, poor saver, or both, then Digit App is here to help. Here’s how it works.
First, you sign up for it and link the program to your checking account. Then, every few days the app will study your spending habits, cash flow, and vital expenses, and through a complex algorithm that synthesizes all this info while working behind the scenes, it will withdraw a few dollars to a Digit account that is FDIC-insured up to $250,000.
The algorithm works in such a way that when withdrawals are made they will be so small you will barely notice, if you notice at all. Done over time, this adds up to a full-fledged savings account.
If you want to withdraw from this account, all you have to do is send a text message with the amount, and the funds will be back in your checking account the next day.
The Digit App is the brainchild of CEO Ethan Bloch, a 29-year-old entrepreneur, who managed to pick up $2.5 million in seed funding from Google Ventures, Baseline Ventures, and a handful of other firms last December, Business Insidernotes.
According to BI‘s Eugene Kim, the app looks primarily at four areas, including “the level of money in your checking account, upcoming salary, upcoming bills, and how you’ve been spending lately (with some banks, Digit can pull three years of transaction data).”
“So if you get fired one day and your paycheck stops, Digit will see that and readjust the transfer amount,” Kim adds. “Users can always manually set their savings amount, and, if needed, withdraw their savings anytime they want, too.”
Digit is free and pays transfer and operating costs through interest it earns saving users’ money at its partner banks. It does not pay interest but plans to when the financial base of the company is more secure.
“Our goal is to share some of the interest with our customers as we grow our deposits, as long as we know we can cover our costs,” Bloch said.
Would you use the Digit App to help save money?