How do you eat an elephant? One bite at a time, of course. Achieving financial independence works in much the same way: unless you win the lottery, the only way to prosper is to do the little things right, time after time.
So much for the theory. Even once you realize that freedom from financial worries starts with developing the right habits, putting them into practice is far from easy. After all, why not use pocket change to buy candy? Surely you’ll remember about that bill before it’s due? You don’t need a budget; you know more or less what you have in the bank…
Automatic savings apps can provide a much-needed boost to your financial awareness and willpower. The truth is that the most financially responsible people aren’t necessarily the smartest – in the end, the principles involved aren’t that hard to understand. What sets them apart is the discipline needed to keep track of their earnings and obligations, save small amounts when they can, and plan for future expenses instead of relying only on credit. All of these things and much besides become easy when you choose the automatic savings app that’s right for you.
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How Automatic Savings Apps Make Your Money Go Further
Before we dive into the reviews themselves, let’s take a moment to think about why you might want an automatic savings app to begin with. The significance of having some money in the bank can be summed up in one word: options.
If you’re living paycheck to paycheck, there’s little you can do when laid off except pile debt on your credit cards. Should you be caught out without an emergency fund, something as simple as an emergency trip to the dentist may force you to take out an expensive instant loan. If you have a little squirreled away, on the other hand, you can start looking at investing and make your money work for you instead of spending the rest of your working life on a debt treadmill. Once you retire, savings allow you to choose the senior life you want instead of whatever you can afford on Social Security.
When you think about it, we can all agree that building up a cash reserve is an incredibly good idea. It provides you with both freedom and security, makes it much easier to be generous, and lets you plan more than a month ahead – yet 70% of Americans don’t have even a thousand dollars saved! Only 6%, or one in twenty, have over $50,000 in a savings account, and fifty grand doesn’t go very far at all these days. (Note that this doesn’t take long-term investments like 401(k)s into account, but these are of little use when you need cash in a hurry: the penalties and taxes you have to pay on early withdrawals mean that getting a personal loan may be a cheaper option).
The solution really is a no-brainer, but it’s not, as many people think, necessarily about spending less and earning more. An increase in a person’s earnings almost inevitably leads to a more lavish lifestyle and buying additional useless geegaws, even if they can’t afford the ones they already own. If you want to improve your financial health, you simply have to start saving automatically.
Ideally, you’ll put some money away as soon as you get your paycheck, but this may be difficult if you’re struggling to make ends meet. The next best option is to keep a close eye on your spending day to day and week to week, figure out where you can shave a few dollars off regular expenses, set savings goals, and then manage your cash so you can reach these without living like a pauper. This may sound difficult, but the right app will automate much of the work, leaving you free to pay attention to the things you enjoy.
What to Look for in an Automatic Savings App
Though we’re pretty confident that at least one of the options we’ll describe in a moment will suit you, you shouldn’t just download the first app you see. There are some pretty significant differences between them, and a college student (for example) will need other features than those that are important to a parent or someone living on a fixed income. The following characteristics are all worth looking out for, though, and played a major role in our criteria for selecting apps to be on this list.
- It keeps your savings separate from spending money but makes them visible. One of the great things about starting to save deliberately is that you can track your progress. Realizing that the small changes you’re making are having a real effect is a powerful motivator. At the same time, the app should prevent you from falling into the trap of using the savings marked “Holiday to Rome” for ordinary bills or luxuries that don’t really mean as much to you.
- It makes saving as effortless as possible. Every time you have to make a conscious decision to save rather than spend, you consume willpower, leaving less available for other tasks. Some days, you’ll certainly give into temptation, severely curtailing your accomplishments over time.
- It’s also a financial planning tool. One of the features that distinguish a good savings app from a great one is the ability to set limits to different kinds of spending, plan for the future, avoid surprises, and get a quick overview of your financial situation. If you’re already working from a monthly budget, this may be less important to you.
- Offers good advice on managing your money. Many automatic savings apps include a digital advisor, often in the form of a chatbot. Some apps can make suggestions very similar to those you’d receive from a human financial planner as long as your situation isn’t too complicated.
- It’s as easy as possible to use. Even the most powerful app is useless unless the average person can operate it. Most savings apps, thankfully, are very user-friendly and have a short learning curve.
The Best Automatic Savings Apps of 2020
All you really need to start making use of these powerful money-saving tools is to open a savings account and download your chosen app. Don’t be too hasty, though: a couple of these options will work with nearly any savings account but others not so much. Take some time to weigh your choices, especially if you’re considering an automatic savings app that charges a monthly fee.
Best for: People who are serious about building up their savings over the long term.
- Can select your own investment risk profile
- Cashback on certain debit and credit card purchases
- $1 to $5 per month management fee
- Small chance of your savings shrinking rather than growing
Even with a high-yield, online-only savings account, the maximum interest rate you can expect is only about 2%. Exchange traded funds are structured completely differently: instead of giving your money to a bank for safekeeping, you buy a small share of a basket of securities which may include domestic and foreign stocks, bonds, real estate and more. These investments almost always outperform savings accounts: anything below 4% can be considered mediocre. The downside, of course, is that ETFs can go down as well as up, especially if another financial crisis like that of 2009 hits us.
This, as you may have already guessed, is what sets Acorns apart from most automatic savings apps. As long as you understand the (slight) risk involved, you don’t need to know a thing about investing to get started. The app will walk you through the process of deciding which types of fund you want to invest in – the greater the potential return, the higher the possibility of losses – and that’s pretty much it.
As for setting up the automatic savings, you have three options. As with most savings apps, you can choose to round up purchases made with linked credit or debit cards to the nearest dollar, saving the difference (or, if you choose, up to ten times that amount each time). You can also set things up so that a sum you choose is transferred to your Acorns account every day, week or month, or send a lump sum that way when you have extra cash burning a hole in your checking account.
In addition, you get cash rewards whenever you shop at over 300 partner companies, including Walmart, Airbnb, Macy’s, Chevron, and Sephora. These are automatically added to your Acorns nest egg and, though it may not be much, the amount really adds up over time. While this is a definite plus, Acorns is mainly a platform to make investment easy and habitual. Unlike many saving apps, there’s no provision for saving towards multiple, defined goals, nor personalized advice on your spending and investment habits.
The downside to all this is that, unlike some other options, Acorns isn’t free. At the lowest tier, you get all the functionality described above, plus access to a pretty impressive collection of educational material. One dollar a month may not seem like much, but unless your portfolio with them amounts to at least a couple of thousand dollars, this constitutes a noticeable drain on your savings. We should mention that Betterment, which is similar in many ways, charges only 0.25% annually. This works out equal to the Acorns basic plan’s $12/year only once you have $4,800 invested.
Paying $3 per month instead provides you with a tax-free retirement account (i.e. an IRA), which may be useful if you can’t get one managed by an employer. You’ll also receive an Acorn debit card linked to a checking account they manage, which allows you to invest up to 10% of purchases made with it even at retailers who aren’t in the Acorns Found Money rewards program. A $5 monthly fee, meanwhile, includes all of the above and also lets you open investment accounts for each of your children.
Best for: People with a fairly high income but limited financial savvy.
Digit doesn’t save a flat amount for you every day or week. Instead, it uses predictive modeling to make a guess at how much you can afford to save and collects that amount without you even noticing.
- Bonus based on how much you save
- Cool chatbot interface
- Can define goals, including paying off specific debts
- $5 monthly fee seems steep considering that free alternatives exist
- Saved money doesn’t draw interest
Digit was one of the first apps with an automatic savings feature driven by artificial intelligence. Does “original” mean “best” in this case, or has it been surpassed by younger competitors? As far as we’re concerned, it’s still holding its own – but the high monthly fee makes it worth considering only if you’re going to use it to save several thousand dollars a year.
Its best (and also most intimidating) feature is that it allows software to decide how much to transfer to your Digit account every day. This is done by evaluating your recent spending as well as any upcoming income and expenses, and works surprisingly well. In any case, you can withdraw funds from your “Rainy Day Fund”, as Digit likes to call its accounts, at any time.
You can also specify a minimum amount that should always remain in your checking account in order to prevent overdrafts – should the balance dip below that figure, Digit transfers money back. If your account does get overdrawn due to the Digit app saving too much, the company will refund you the costs.
Another nice feature, which Digit shares with numerous automatic saving apps, is that you can define several savings goals to wall off funds intended for one thing from other uses. Interestingly, one or more of these goals can be paying off a debt. Simply set this, which is usually a student loan or credit card, as a goal and connect your lender account to Digit. Every day, Digit’s AI will earmark money for this purpose and pay the lender at the end of the month, over and above the regular payment you should still make.
Instead of using an account dashboard, you will generally interact with Digit through its chatbot. This can get a little frustrating, but the novelty factor will make it worth it for some people. A much more helpful feature is Digit’s savings bonus: as long as you save with them for three months in succession, you get the equivalent of 0.5% APY added to your account. No other interest is added to what you save, though, making Digit unattractive in that regard. In addition, $5 a month is expensive for any kind of app, never mind one actually intended to save you money. This has to be weighed against the fact that Digit’s predictive saving will encourage many people to start putting away more. If you don’t quite trust yourself when it comes to managing your checking account, sixty bucks a year may in fact be worth it.
Best for: Smaller savers, especially those who don’t yet have a savings account.
Chime is not just an app, but actually an online bank account that includes a robust automatic saving feature.
- Full-service banking as long as you don’t need too much, including assistance from branch staff
- No overdraft, monthly or transfer fees
- 10% bonus (up to $500 per year)
- Only a basic checking and savings account plus a secured credit card available.
One percent APY isn’t exactly astonishing, but it’s certainly in the ballpark when it comes to online savings accounts. Once you combine this with a free app that makes saving just about as easy as it can possibly be, though, you have a competitive alternative to Digit and Acorns, especially for people who can’t yet afford to save huge sums. Anyone who has difficulty applying for a bank account should also take note of the fact that Chime doesn’t look at your ChexSystems record when considering your application – even if you have a history of bounced checks, overdrafts and late credit card payments, they may be willing to work with you.
As for the automatic savings app, it does little more than send you notifications of any account activity and round up your purchases to the nearest dollar, transferring the difference from your checking to your savings account. You’ll also receive an encouraging 10% on top of interest on the money you save in this way, up to a maximum of $500 per year.
Their debit cards can be used for free at any of 38,000 ATMs nationwide. In keeping with the theme of attracting customers other banks won’t deal with, Chime can provide you with a credit card that requires no credit check and charges zero interest. Transactions are reported to all three major credit bureaus, helping customers to improve their credit score as well as their savings over time.
Best for: People who sometimes have trouble keeping track of their day-to-day spending.
Empower Finance allows you to request cash advances of up to $250, tracks your spending, and also acts as an automatic saving app.
- Excellent budgeting tool for those who’ve never learned the skill
- Recognizes many bills and subscriptions automatically
- Costs $8 per month to use.
- Takes a while to become familiar with the app
The first thing you’ll need to do with Empower Finance is to connect an existing checking account. After that, you will be asked to categorize your different expenses, which enables Empower to draw up a budget for you. It may even suggest a few areas in which you can spend less, including by negotiating discounts on things like phone, cable and utility bills.
This will help you figure out how much you can afford to place into a savings account of your choice each month, or use to pay off a debt that’s dragging you down. Another feature of this app, which you may find to be either a huge convenience or a pain in the neck, is the ability to set spending limits for each category. You can see at a glance how much you’ve spent so far on groceries, eating out and whatever other budget items you’ve defined – but this is no more than annoying unless you really want to limit each type of spending to a certain amount each and every month. If you do your clothes shopping at the start of every season, for example, you’ll need a more powerful budgeting application to make sense of and plan for this properly.
You can also get checking and savings accounts from Empower themselves, which will mean no overdraft fees and easy access to small cash advances when your paycheck seems to lag behind your expenses. The current APY for this checking account is 0.25%, which is fairly competitive. You can transfer money between accounts right from the app, which even allows you to connect cryptocurrency wallets.
All of this is certainly impressive, but is it worth eight dollars a month? All in all, we’d say that features like monthly spending reports and the ability to apply for cash advances can justify this price in some cases. On the other hand, Clarity Money does much the same but for free.
Best for: Couples who want to build a better financial future together.
Twine is perfect for romantic partners who are either saving for a medium-term goal or want to start investing in earnest.
- Optimized for couples, with individual accounts contributing to shared saving goals
- Decent 1.05% annual percentage yield on the savings account
- The option of investing in EFTs and mutual funds
- Multiple savings goals require multiple Twine accounts, reducing flexibility
- No Android app to date
It’s no secret that arguments over money can put a strain even on the most caring relationship – at least anecdotally, financial disagreements are the most common cause for marriages ending in divorce. While there’s no substitute for open and regular communication about shared finances, saving together for both unforeseen expenses and anticipated enjoyments certainly can’t hurt.
This is the idea behind Twine. Each partner links their own bank details to one or more Twine accounts – each saving goal, for instance a vacation or a down payment on a house, is managed separately. From there on, it works just like any other automatic saving app: money is deducted from each of your accounts every month by direct deposit and you can watch your dream come closer to fruition. Each partner may contribute a different amount, and having independent goals is also an option. As you would expect, you can also pause payments temporarily or make lump-sum transfers.
Like with Acorns, you can also get a start on investing using Twine, though again the idea is for two people to do this jointly. You can choose to invest either in EFTs or mutual funds – the main difference is that you’ll generally pay less tax on EFT gains. The app will recommend a portfolio and risk profile based on your answers to a brief questionnaire. Though a Twine savings account doesn’t come with any fees, investment accounts cost 0.6% of the invested sum per year, which is far from unreasonable.
Is Using an Automatic Saving App Safe?
Giving a piece of software access to your bank account may seem like a scary idea – what if Artificial Intelligence runs wild and starts using your money to buy more RAM for itself? Luckily, this can’t happen: any savings app has only a one-way, read-only connection to your bank account. When money is transferred to the app, this is done by direct debit, meaning that the whole process is completely transparent and auditable.
The bigger risk is twofold. In the first place, while the advice some of these apps offer is generally sound, it’s never a good idea to follow it blindly. You can’t delegate personal responsibility for your financial decisions – if in doubt, it’s always a good idea to check with a qualified human advisor.
The other side of this coin is that free saving apps may contain ads, or add them in future. These ads will usually be those tailored to appeal to someone with financial habits similar to yours, but they may not be the best idea for you in particular. In other words, free advice – especially that found in ads – is a wonderful thing, but should always be taken with a large grain of salt.
Why Automatic Savings Apps Are Such a Good Idea
It’s sometimes useful to think in terms of today-money, tomorrow-money, and yesterday-money. Today-money is the cash you have in your wallet; most people get it and spend it without much time passing in between. Today-money, in other words, means living paycheck to paycheck.
Tomorrow-money is even worse: credit cards, personal loans and all forms of debt. In some cases, buying on credit is the only responsible thing to do, but remember that tomorrow inevitably arrives. Borrowed money is almost always more expensive than cash.
Finally, there is yesterday-money: that which you’ve previously salted away and can now use for whatever you deem fit. Unlike a loan or a paycheck, it is always available when you need it, and it doesn’t come with finance charges – in fact, the interest ends up in your pocket instead of the bank’s.
If you can, you should really increase the amount of yesterday-money in your life. This means nothing more than saving. Building a cash reserve isn’t something you have to do all at once; this is usually impossible. By making a commitment to save a little at every opportunity, though, you can start sowing the seeds for a better financial future without ever feeling deprived. This is exactly what automatic money-saving apps allow you to do.
Are you still putting your spare change into a piggy bank on your dresser, or have you made the leap into the digital age? Let us know about any experiences you’ve had with the apps above or perhaps those we didn’t mention – you may just help someone else make a better choice.