I’ve heard dozens of people compare saving money to eating vegetables. They’re both healthy life choices that all of the experts (and your mom) tell you to do, but despite knowing you should, you just don’t… or, at least, not nearly as much as recommended.
Fortunately, saving money has become significantly easier with the recent influx of automated savings apps that are currently on the market.
These are apps like Digit, Qapital, and Acorns (investing-based), and even some banks, like Bank of America, offer automated savings functions. The goal is to make saving money a passive and painless process, and that’s cool because many people aren’t saving nearly as much as they should.
No matter what your goals are – a fully funded emergency fund, a downpayment for a house, or retirement – finding ways to save money is how you’ll reach them.
What are automated savings apps?
Also known as “microsavings platforms,” these apps pull small amounts of money from one account and transfer them to a savings or investment account. Some apps draw these small amounts of money by rounding up transactions to the next dollar amount or by analyzing your spending habits to calculate a “safe” amount of money to move into savings.
The goal of automated savings apps is to make saving money simple, automatic, and mindless.
One of the major barriers to saving is that many approaches saving money as something to do at the end of the month with whatever money they have leftover. In reality, we all should be paying ourselves first. Automated savings apps remove that barrier because they help you save money throughout the month, so you are essentially paying yourself as you go.
Another common barrier to saving money is that many people think they need to make some giant monthly deposit, which is intimidating if you’re trying to create a new habit. Rather than large deposits, automated savings apps break things down into easy to digest chunks of money – $0.75 here, $0.43 there, and so on. It’s like saving the spare change that’s in your couch.
Top automated savings apps for 2019
There are currently many options for automated savings apps, and while they all function similarly, you’ll want to shop around to find the one that’s best for you. I’d pay attention to the fees, how each app handles overdraft charges, and the type of savings account your money is being moved to.
1. Digit
Digit is one of the few automated savings apps that doesn’t do roundups to automate your savings. Instead, it uses “sophisticated algorithms” to learn your spending habits and then automatically pull just the right amount out of one account into an FDIC-insured Digit account. The transfer is usually between $2 to $14, and they happen 2-3 times per week. The cost to use Digit is $2.99 per month, and they offer a 30-day free trial period.
Other Digit features:
- Digit accounts come with a 1% annual savings bonus based on the amount held in your account, which is paid out every three months.
- You can do essentially all of your banking via text message. You can even text “PAUSE” to Digit’s number to put a hold on your automated savings.
- The app allows you to set savings goals.
- Considered to be one of the top automated savings apps, Digit prides themselves on knowing your spending well enough that their transfers won’t overdraft your account. If they do, they will reimburse that charge up to two times.
You can learn more and sign up for Digit here.
2. Qapital
After linking an outside checking account to Qapital, this micro savings app rounds up linked transactions to the next $1, $2, $3, $4, or $5 amount. These round ups are then put into a 0% interest, FDIC-insured account. You can also choose to regularly contribute lump sum amounts to your Qapital account. Qapital has three different account levels: Basic at $3 per month, Complete at $6 per month, and Master at $12 a month. Basic includes access to their savings goals, roundups, and automated rules.
Qapital features:
- You can set multiple savings goals with Qapital, going so far to share them with friends and family to keep you motivated.
- As one of the most popular automated savings apps, Qapital offers eight customizable rules that help you save more. Their “Guilty Pleasure” rule automatically triggers the app to put extra money into you Qapital savings account when you purchase something that you’ve been trying to avoid. The “Freelancer” rule sets money aside for taxes every time you get paid. The “Spend Less” rule banks the money you don’t spend, putting it into defined budget areas.
- There are over 200 IFTTT (If This, Then That) channels that will trigger Qapital to make a transfer. These could be liking videos on YouTube, taking an Uber, posting a Facebook status update, and more.
- Qapital pauses any transactions that will leave you with less than $100 in your checking account to prevent overdraft charges.
Click here to sign up or learn more about Qapital.
3. Acorns
Unlike the other automated savings apps, Acorns is more of a micro investing platform. Even so, I think we can still classify it as an automated savings app. After signing up, you link your checking account to your Acorns Round-Up account and choose your portfolio type (based on your current financial situation and goals), and Acorns will round up every transaction that comes through the linked account to the next $1 level. Once you reach $5 in roundups, Acorns deposits those round ups into your Acorns investment account. You can also make automated, monthly, lump sum deposits in your Acorns account.
Acorns features:
- Different from most automated savings apps, which just remove the barriers to saving money, Acorn goes above and beyond by removing the barriers to investing.
- It costs as little as $1 per month for a diversified investment portfolio with Acorns.
- When you use a linked account to make a purchase at an Acorns partner, you earn a percentage of that purchase back.
- Acorns Later is an option to turn your basic investment account into an IRA.
- Acorns give you a projected account potential that takes into consideration your current round up and deposit rates.
You can read my full Acorns review here.
Where automated savings apps fall short
Not saving enough
I honestly think these apps have a lot of good in them, but my main beef is that if you solely rely on automated savings apps for all of your savings, then you probably won’t be saving enough.
While I wouldn’t say this about Acorns (being that it’s an investment account), the other automated savings apps are really best for working towards smaller savings goals, like a vacation. And, while you could use these apps to boost the other ways that you save money, it’s still saving on a much smaller scale.
The fees might be high
When you look at automated savings apps, one of the things you’ll want to pay attention to are the fees. While many companies charge flat fees, these fees can be high for accounts with low balances. You’ll also want to look into any costs associated with transfers or withdrawals.
Overdraft charges are the worst
I’m happy to see that some of these automated savings apps have some overdraft protections, but I would think twice about any app that didn’t have something like that in place. If you choose to go with an app like Digit, you will want to keep a close eye on your linked account, especially in times when you are spending more.
Mindless is cool, but being proactive is how you’ll really grow your savings
At their core, these apps are showing you that it is possible for anyone to save money by demonstrating that every penny counts. Eventually, though, you’ll need to make some conscious decisions to actually save enough for larger goals, like buying a house or retirement.
One way to use these automated savings apps might be to see what your average monthly savings are over the course of a few months. Once you’ve estimated an amount, open a high-interest rate savings account and set up an automatic deposit into that account. You could continue using the apps, then realizing that it is possible to set even more aside.
Be wary of their linked debit or checking account options
One of the features that many automated savings apps offer is a debit card that makes it easy to spend what’s in your savings account. Try not to treat these funds like extra spending money. While this could be your short-term goal for saving, saving money is the way you can actively protect yourself from debt – i.e. having the needed money for emergencies, how you’ll be able to plan for retirement, etc.
Question for you:
Have you tried an automated savings app?
I love how Qapital will punish you by forcing you to contribute to savings every time you purchase a “Guildy Pleasure.” I’m typically not a fan of these micro-savings apps because they make people feel like they’re making steps towards retirement when really the savings rate in pretty inconsequential. However, I do love the negative feedback that this feature gives you when you make an unnessary purchase (e.g., Starbucks).
I signed up for Acorn and then cancelled the next day. Why? I didn’t like the idea of linking my personal checking account with a completely “unknown” virtual company. Way too easy to hack. It sounds good, but I would rather just link to a stand alone credit card. Unfortunately, Acorn doesn’t provide that option.
Thanks for this post. It is interesting to ask if paying someone to help you to save is a good idea? I can see how these apps might help you with the behavioral change part of setting the right habits to get to eventual financial independence but it also has me asking if one is ever really going to get through all of the other changes and discipline along the way if this first step can’t already be handled without spending more to do so? Best of luck on the path to all
I love Digit! I have a “real” savings account, but i like having my little buckets of money for small goals on digit. Helps me save for vacation, books for the kids’ college classes and even the down payment on our kitchen remodel!
While I am a huge fan of saving and planning, I still wonder the long term effect of these apps. Do they help you enough as a small saver to turn into an even bigger saver? My concern is that they may give someone a false sense of saving enough when they are really saving very little. Again we all have to start somewhere I think the key is making sure to not stick with the small but look for ways to grow it.
I’ve been using Acorns for awhile. But the honeymoon period is fading and I’m considering canceling. While the mindless saving is nice, I think I have the self control to do the same on my own, invest more strategically, and not have to pay to do it. But that said I’m still using it for now while I contemplate if it’s the right tool for me.