What if you could save money without thinking about it? Here’s my Digit Review.
My buddy J. Money at Budgets Are Sexy put me on to a cool new website designed to help you save money without thinking about it. It’s called Digit, and here’s what I think about it, after using it for a few weeks.
Digit Review: Automatic Savings from Your Checking Account
In order to ensure that I save money and pay my bills on time, my finances are largely automated. When it comes to the way I save money, there are four main strategies I put into place:
- Retirement savings with Betterment: My long-term wealth building strategy revolves around a retirement account with Betterment. Every month, I make an automatic contribution. I keep my hands off this money. (Read my Betterment Review.)
- Long-term emergency fund with a taxable investment account: My long-term emergency fund — the money that I need in the event of a major setback — is automatically invested in an ETF following the S&P 500, where it can grow at a much faster rate than seen in a high-yield savings account.
- Short-term emergency savings in a high-yield account: Every month, a small amount is automatically transferred from my checking account into a high-yield account. I keep about three weeks’ worth of expenses in this account for immediate needs. When the account balance gets too big, I transfer some of the money into the taxable account for the long-term emergency fund.
- Taxes for quarterly payment: Finally, I make it a point to automatically set money aside each month that can be used for taxes. I can use this money to make quarterly estimated payments, and use it to pay my state taxes as well.
Even with all of this, I was curious as to whether or not I could do better. Was there more room to save money to a greater extent? I signed up with Digit toward the end of January 2015, and my first automatic savings amount, $3.61, was transferred out of my checking account on January.
Since then, as Digit has analyzed my account history and learned the financial habits associated with my account, different amounts have been withdrawn. The latest savings amount was $29.45, which brought the total in my Digit account up to $148.30.
As you can see, it’s easy to see your total, how many savings transfers have been made, the average amount of each transaction, and the number of days between transfers. As you can see, Digit pretty much transfers money from my checking account to my Digit account every other day. I also found it interesting that, in the less than a month I’ve been using this service so that I can write this Digit review, my habits indicate that I could be setting aside almost $150 extra. That’s food for thought.
The interface with Digit is very easy and intuitive. You can see a journal of all the transactions involved, and even adjust how your account works. You can adjust how much comes out of your account, and its frequency. It’s also possible to pause your automatic saving if you feel as though upcoming financial obligations will change your situation.
Another feature that I like with Digit is the fact that you can easily manage your account from your phone. Set up to receive texts, and each day Digit keeps you apprised of your situation. It’s easy to see how much you have in your checking account, and you can also use various commands to get more information about checking account transactions, Digit savings, and even decide to withdraw money. When I attempted to withdraw money from my Digit account, it was very simple. I simply texted “Withdraw” to Digit, and a return text asked me how much of my balance I wanted transferred back to my savings account. It took two business days, and the money appeared in my account seamlessly. It’s also possible to add a memo for your Digit savings withdrawal so that you can see why you made the transfer.
Digit Review: Downsides to Digit Savings
I like the idea of letting Digit analyze the realities of my checking account and automatically transferring money into a savings account. The downside to using Digit is the fact that you won’t earn any interest at all — not even the paltry amount you would get at a brick and mortar store. Instead, Digit keeps the interest as a way to help cover administrative costs.
However, just because Digit doesn’t pay you interest doesn’t mean it’s not a good idea. I can see using Digit as a very short-term savings vehicle. It could be the place where I keep money that I need to smooth my cash flow during months when clients pay late. Since the money is fairly easy to access, it’s ideal for these situations.
Another strategy is to use the money saved by Digit to invest. I can transfer the money back to my account, and then invest it in my long-term emergency fund, or use it to boost my income portfolio, which isn’t part of my automated financial plan. However, that requires a couple extra steps. But it’s not a bad way to automatically find extra money to invest.
The other issue that might be problematic with Digit is the fact that you need to pay attention to the money that comes out. It’s a different amount each time a transfer is made, and that means that you need to make sure that your Digit savings withdrawal isn’t getting lost in the shuffle and ultimately contributing to overdrawing your account. While the hope is that Digit won’t keep withdrawing if your account balance gets too low, you might not realize where you’re at if your account is a close-run thing. You might need to adjust your record-keeping to ensure that Digit doesn’t mess up your account.
Digit Review: Bottom Line
Overall, I like Digit. I’ll probably stick with it. Clearly, I’ve been inefficient with setting money aside, and Digit can help me remedy that problem. As long as I keep track of how much is transferred from my checking account, and as long as I develop a strategy that keeps me from building up too much in the Digit account (don’t want to lose to inflation), I think it can be a great addition to my financial plan.
Digit has a great referral program. Refer your friends, and Digit will give you a bit of a kickback. Sign up using my Digit referral link, and I’ll get a small commission.