Everyone knows that they should strive to save money and break the cycle of living paycheck to paycheck… but that’s always far easier said than done. Most of the reason for this is strictly financial but a part of it can actually be mental as well. Sometimes looking at your checking balance might lead you to believe that you simply can’t afford to be setting aside anything.
Enter Digit and their automated savings plan that promises to assess your spending and find ways to help you sock away funds. While it’s far from the only automated savings solution market, the app does make a name for itself with some unique and clever features. Like what, you ask? Let’s take a closer look at Digit, including some of the pros and cons.
What is Digit and How Does it Work?
Digit is an automated savings app that uses algorithms and spending insight to determine how much money you could be setting aside. Moreover, you can tell the app what financial goals you’re saving for (building an emergency fund, paying off debt, taking a vacation, etc.) and it will help keep you on track to succeed. While the overall idea behind Digit may sound basic, the execution is anything but.
Signing up and setting up your Digit account
Literally the first aspect of Digit you’re likely to encounter is their simple sign-up process. To get started, you’ll enter a phone number and create a password. The phone number will not only come into play as you’ll need to enter the verification code they text you, but it will also be a major factor we’ll talk about later.
Once you’ve verified your number, the next step is to link a bank account. Like oh so many other FinTech apps, Digit utilizes Plaid to securely access your balance information and make transfers. To allow this, you’ll log into your account using your online banking username and password. If you have two-factor authentication turned on, you’ll likely also need to enter a confirmation code either e-mailed or texted to your contact info on file.
With that out of the way, you’re ready to start exploring Digit.
After you set up Digit, there’s really nothing else you need to do to start saving money. After all, the main pitch of the app is that it sets money aside for you automatically. However there are a few customizations you can make. For example, as I mentioned, you can create multiple savings goals for Digit to help you achieve. When setting these up, you can tell the app how much you need to have saved and by what date, which it will take into account when building your savings. If you really want to prioritize a certain goal, you can also Boost it by tapping the goal in the app and going to Settings.
Another feature you might want to employ is their Low Balance Protection. This function will enable Digit to automatically transfer money back to your checking account if your bank balance dips below a certain threshold. In addition to specifying what balance you wish to trigger such a transfer, you can also choose which savings goal you want money to be pulled from.
Another helpful function of Digit is that it will give you regular updates on your bank balance via SMS. This is far from the only thing you can do to interact with the service through texting, but we’ll get into that more in the next section. You can determine how often you’d like to receive these updates by adjusting your setting. Options include daily, weekly, or not at all.
On top of the checking balance notifications, you’ll also receive regular updates on your various goals and savings balances. Of course you can always find these on the main screen of the app as well.
The Good and Bad of Digit
Texting with Digit
As I mentioned above, one of the main ways you can interact with Digit is via SMS — also known as “texting.” Digit has a dedicated (San Francisco-based, of course) phone number — (415) 801-8147 — that you can message to perform certain tasks, manage your account, and more. This is also the main way that the service provides you with balance updates and the like.
I was actually really impressed with how functional and fun this aspect of Digit was. For example, I was able to set up a new savings goal just by answering a few prompts via text. Plus I was able to assign an emoji that said goal, meaning that I can now get updates just by sending that emoji to Digit.
Yes this all sounds gimmicky and perhaps too “Millennial” (or Gen Z), but I’d be lying if I said I didn’t enjoy it. In the event you don’t care to text with Digit, you can still perform all of the same functions in the app using the chat feature.
The monthly fee
The biggest negative to Digit is easily its monthly fee. Following a free 30-day trial, you’ll be charged $5 a month to use the app (this fee was previously $2.99 a month and current users will stay at that rate). Your monthly fee will automatically be deducted from your linked checking account so, if you’re not looking, you might miss it.
Should you tire of this fee, you’ll need to close your account in order to prevent future payments. This doesn’t just mean transferring your savings back to your checking account but formally closing it by going into your settings, hitting Manage Account, and finally “Close Digit Account.” By the way, even if you don’t plan on canceling just yet, this is also where you can view when your next payment will made.
Partially offsetting the steep monthly fee is the fact that Digit pays you a 1% Savings Bonus every 90 days. Well, although it’s billed as a 1% bonus, the app explains that it’s actually 1% annually, paid quarterly — meaning that you’ll only receive a .25% bonus each time. Also this bonus is based on the average daily balance in your Digit account over the prior three months.
Although any bonus is welcome, this turns out to be both a pro and a con. If each bonus were a full 1%, that would be fairly notable. But, as it stands, there are far better options for earning interest.
Makes it easy to save
To its credit, there’s no doubt in my mind that Digit can help make it easier for people to get into the habit of saving. While I’ve seen some criticism that automated savings can actually be a bad thing as you’re not learning the lessons and making the effort yourself, it’s worth noting that Digit is far from covert when it comes to pulling your funds. Sure it’s automatic but it definitely informs you early and often. In my opinion, this brings more motivation to the affair, while also showing you that setting aside money to reach your goals is possible.
Only one checking account
In my eyes, another drawback of Digit is that it only allows you to link a single checking account. This probably makes sense for the majority of users but caused a bit of a conundrum for me as I couldn’t decide which of my checking accounts it made the most sense to connect. Moreover, since I use multiple accounts, I do wonder if I inadvertently made it harder for Digit to determine how much to set aside for me. Honestly I’m not sure that supporting a multiple-account option would work but, for me, neither does the single account setup.
In my opinion, Digit is a clever, helpful, and surprisingly fun app. That’s why it breaks my heart that the $5 a month fee makes it so hard to recommend. Moreover, while I admire what the service is going for, it doesn’t really make sense for where I am in my financial journey. Although I’m a fan of automated savings and continue to use such services, I feel like the way Digit’s algorithm is meant to work doesn’t lend itself to the way I spend and save.
With that said, if you find yourself having trouble saving and want some help, Digit could very well be worth it. After all, if you can painlessly build an emergency fund that will protect you from taking on credit card debt or worse, $5 a month might seem like a drop in the bucket. Still, at a certain point, it may be best to wean yourself off of the service, take what you’ve learned, and start saving for yourself.
As much as I enjoy Digit and appreciate the many options it offers, I’d be more inclined to recommend an app like Clarity Money that offers a strong interest rate on savings (currently 2% if you opt-into a Marcus by Goldman Sachs account). Or, if you’re looking for an app that still brings fun to savings, I’m a big fan of Long Game. Neither of these apps offer everything Digit does, but at least they won’t cost you anything to use.
Frequently Asked Questions
Digit is service that helps users automatically set aside money and build up their savings. Uniquely, users can interact with Digit via the app or through SMS.
Yes. After a 30 day free trial, Digit costs $5 a month for new users.
Yes. Deposits are insured up to $250,000.
Digit users can elect to withdraw funds using Standard Transfer for free or choose an Instant Transfer for a fee of $.99. When choosing to withdraw funds, an estimated delivery date will display, allowing customers to make an informed decision.
Also published on Medium.