An app to save spare change isn't good enough
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There are enough apps out there that want to collect your digital spare change that I’m beginning to lose track.There’s Digit, which analyzes your spending and automatically puts money in a savings account when it deems that you can afford it. Then there’s Qapital, which will let you set up a number of triggers that will help you save automatically. There’s also Acorns, an app that rounds up transactions from your checking and credit card accounts and puts the spare change into an investment portfolio.
Even Betterment, a relatively old player in the digital investment portfolio space, now has a "SmartDeposit" feature. And all of these apps are built around an idea that banks like Citibank and Bank of America have been playing around with for years.All of these services are built around a simple idea: you’re not saving enough. Which is true, statistically speaking. A recent US News article reports that almost half of this country is under-saving. We should be putting away about 15% of our incomes every year for retirement, but only a quarter of Americans are saving more than 10%.This has pretty dire consequences. Besides not being ready for retirement, a lot of Americans have basically no emergency savings. That leaves them completely unprepared for a medical emergency, a lost job, or any combination of a big bill or loss of income.The solution, according to products like Digit, is to do the savings for you. Digit connects to your bank account, watches all of your transactions, and judges for itself when and how much you can put aside into a savings account. Because you don’t know how to save, Digit implies, we’re going to do it for you. Digit’s intro video attempts to be friendly about it – saving is boring, they say, and requires "planning… and stuff." The implication? You’ve already proven that you can’t be trusted with your own savings, so let our smart computer product do it for you.
You might think I’m taking it a bit too personally, but I believe it’s indicative of real philosophical difference between something like Digit and, say, a piece of budgeting software like You Need A Budget (YNAB). YNAB is similarly built around the idea that you’re not good at saving, but instead of completely automating it for you, it makes you more aware of where your money is going and how you can start saving. The difference, in a nutshell, is that it empowers its users to save and changes a user’s mindset, as opposed to completely taking the task out of the user’s hands.Even something like Simple Bank’s Goals feature is more empowering than Digit. Goals could also be described as automated savings, but it’s much more transparent than Digit’s algorithm. With Simple Bank, you set up your Goals, you say you how much you want and when you want it, and it tells you how much it will take out of your checking account every day in order to reach that Goal. It does it all for you – that part is automated – but you have full control over it. Philosophically, this is much more in line with YNAB than Digit – yes, Simple Bank wants to make savings, well, simpler, but they still want you to do it and to be aware of it.
Awareness and lack thereof is not only the difference between these products, it’s the difference between people who save and people who don’t. "The best savers are not the highest income households," financial analyst Greg McBride told U.S. News. "They’re middle income households. Saving is not a function of income. It’s a function of having the ability to live within your means and save consistently."As far as I’m concerned, Digit, Acorns, and other apps that collect digital spare change aren’t actually helping anyone learn how to put aside money. Sure, it might help you collect a few dollars and cents on the side, but it doesn’t help anyone become more aware of how they’re spending their money, how to live within their means, or how to build up the self-discipline to consistently save on your own.Frankly, the 75% of Americans who aren’t saving more than 10% of their income deserve better and more interesting tech products built around savings.
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