Are you saving as much as you could be?
Chances are, you’re not.
Estimates suggest that American households waste between 10% and 15% of their income each month. That money could be building your future.
How can you recapture some of that lost money? Thanks to Digit, it’s possible for you to salvage some of your pocket change and save it.
This Digit review will help you understand how it works, and why it might be a good idea for you.
What is Digit?
Digit is a company that connects to your bank account. Using an algorithm, Digit analyzes your financial habits, including spending. Using that information, the app makes small withdrawals from your bank account and deposits them in your Digit account.
These withdrawals are based on what you can afford to deposit. That means it might be as little as $2 a day, or even less. It also means that you might see transfers of $50 or more. It all depends on your habits, and the way money flows through your bank account. The amount is different each day, depending on what the algorithm says you can spare.
You don’t even have to worry about Digit overdrawing your account. Digit offers a guarantee that it won’t cause an overdraft on your account. Even if you’re only moving $1 per day, that’s still probably an upgrade over what you were saving before.
It’s also worth noting that Digit does pay interest. However, it’s not a set rate. Instead, you get 5 cents for every $100 in the account, based on your average balance over the past three months. You’re not going to see a huge return with Digit.
Update: As of the middle of April 2017, Digit is adding a monthly fee of $2.99. The company is also increasing its payout to a 1% APY, paid every quarter, based on the average balance for the last three months.
How to use Digit
Digit is very easy to use. It’s simple and straightforward to set up. All you need to do is provide the type of personal information you do when opening any other financial account. Decide which account you want to connect, and you’re good to go.
Digit works best if you use a transactional account, like a checking account. That way, you are seeing regular income into the account. Digit can analyze the way your money is moving through your system and withdraw an amount that makes sense.
You don’t have to think about the money as it comes out. It’s done automatically, and it builds in an account, out of sight, out of mind.
Originally, I thought I’d use my Digit account as a way to capture more money to invest. However, I kind of forgot about it. After a few months, I realized I had enough saved up for a weekend getaway. I did a Digit review of how I use it, and decided that the account was better as a spontaneous “fun fund.”
How you use Digit to reach your goals is up to you. I like letting Digit work its magic over a few months, and then seeing what sort of fun I can have in the short term. Sometimes that means taking my son on a trip over a three-day weekend, and sometimes it means enjoying a spa day.
Other people I know use Digit as a sort of small emergency fund. If they need to replace an appliance or make unexpected repairs on their cars, they see if the Digit account can handle it.
Getting Your Money from Digit
It’s a simple matter to get your money from Digit. When you go to the website and look at your account, there is a list of text commands. All you have to do is use your cell phone to tell Digit what you want to do with the money.
You can easily withdraw to your bank account. While it might take up to three business days for your money to transfer, I’ve never waited that long. My money is almost always in the account by the following business day.
It’s also a simple matter to use text commands to add extra savings to your digit account. You can also pause saving if that becomes necessary.
Digit Review: Bottom Line
If you want to maximize your savings, on top of your other efforts to save for retirement and invest, Digit is a good choice.
Digit isn’t going to help you build a huge nest egg; the returns are too small. However, if you want to build up a small stock of savings you can put toward various goals, Digit is a good choice. It helps you save money you didn’t realize was available — and you don’t even have to think about it.