If you suck at saving money and/or are just plain lazy, you’re going to love this new service out there called Digit.
A friend of mine texted me about it last week and I’ve been obsessed with it ever since – constantly refreshing my screen to see how much I’ve saved since signing up so far (scroll down and you’ll see ;)).
In fact, I loved what they’re doing so much that I made my friend intro me to the founder (they’re entrepreneurial buds from the Y Combinator* circle) so I can learn more and then interview him for this article – which you’ll also see below. They just raised $2.5 Million in funding from backers like Google Ventures and Alexis Ohanian, the co-founder of Reddit, and the author of that TechCrunch article I just linked to has been testing Digit since August and already saved $1,000 bones! Nice!
So I’m telling you – this is going to be big ;) And you guys are some of the very first people to hear about it as the only way to join right now is by invite only (don’t worry, I wouldn’t tease you – any of the links to Digit on this page will get you right in without having to wait. Just make sure you sign up through them if interested so it registers ok). VIP baby!
So, What is Digit?
Digit is a free service that literally saves your money for you so you don’t have to do a thing. All you do is attach your checking account and their robots do the rest – analyzing your income and spending patterns to figure out what amounts you won’t miss, and then xfering these amounts right into a savings account it creates for you.
What I love most about it, other than the simplicity, is that unlike the other killer software out there like Mint.com or Personal Capital (which I also love), you actually feel GOOD every time you log in to check your balances ;) Mint and the others serve a much needed purpose, and one that Americans should definitely be staying on top of (ie budgeting), but often times you log in to go over your numbers and walk away feeling depressed… Your fault for over spending, of course, but still the reality. And not only that, but you then NEED TO TAKE ACTION with the new knowledge you have or what’s the point of tracking it to begin with?
With Digit, you don’t ever have to do a thing once you’re signed up, and you feel good every time you interact with them because your savings only get bigger.
If it sounds like I’m selling them hard, it’s because I am :) But only because I know for a fact most people SAY and TRY and DREAM about saving their money, but then they never do. Even though we all know how easy it is to set up automatic xfers to your own savings every month and pretty much solve the same problem (though Digit says they can better estimate the amounts that should be xfered over to maximize savings). Digit not only does the work for you, but everything about them screams “simple.”
Here’s what my account shows with them (there’s literally only one page – SIMPLE!):
(There’s more to the page once you’re logged in, but this is the part you care most about ;))
UPDATE: Savings after month #1: $199.04
UPDATE: Savings after month #3: $750.37
UPDATE: Savings after month #7: $1,398.84
UPDATE: Savings after month #12: $2,628.20
UPDATE: Savings after month #15: $3,284.70
UPDATE: Savings after month #18: $4,495.83
As you can see, my 1-time action of 5 minutes signing up has already rewarded me with $10.94. Not a ton, but it’s $10.94 that used to be sitting in my checking account probably about to be spent ;) And I’ve only been signed up for a week so far… (Also I love that, unlike other companies, they actually make it easy to call them if you have any questions!! Toll-free number right there in your dashboard – BAM)
Questions You’re Probably Thinking Right Now…
These answers come paraphrased off their FAQ section:
- Is it free? Yes.
- Does it pay interest? YES! Well, technically not interest, but “cash bonuses” as they call it. See below in “cons” haha… (this is as of 8/13/15 btw, beforehand they did not pay out anything)
- How does it work again? Every few days Digit checks your income/spending patterns and moves a few dollars from your checking account into its savings account. But only if you can afford it.
- What if it transfers over too much? They have a “no overdraft” guarantee which means they’ll cover all costs incurred if that should ever happen (which they don’t believe will since the technology is built to avoid such things, of course).
- Do you need to set up a new savings account? No. When you sign up you automatically get one through Digit.
- Is it insured like all other banks? Yup. All money saved is FDIC insured up to $250,000.
- Is it safe, secure, etc? Yes. All personal info is anonymized, encrypted and securely stored using state of the art security measures.
- Can you withdraw your money anytime you want? Of course! All you have to do is text them “withdraw” and you can send your money back to your checking account as often as you need or want. Just like any other bank account.
In fact, I forgot to mention the whole system is set up around text messaging to make it incredibly easy. You can text in for a bunch of things like “savings” to see the amount saved so far, “balance” to check your checking balance, “pause” to stop the savings, and “bills” to see upcoming bills they know you’re about to get. I just sent in “bills” and got back the following:
“I can’t find anything due in the next 7 days. The next bill I see is Check #XXXXX due in ~ 15 days for ~ $934.00”
That’s our bi-weekly daycare bill, ugh… We manually send it in every two weeks and pay around $934 each time – more than a mortgage! And if you’re wondering what my checking account balance is right now, that’s $4,263.61 :) Which they’ll automatically send you too over time to keep you informed.
The Bad Parts to Digit?
There’s a few downsides to using Digit, but honestly the pros far outweigh the cons in my eyes. Still, they’re something to keep in mind:
Your savings earn 0% interest. This is the “worst” part of Digit, and the reason the service is free (they pocket the interest which is how they get paid). Personally though, I could care less. I made a whopping 21 cents off of my Challenge Everything savings account over four months with USAA so far (spoiler alert – my balance has now broke $2,000, woo!), and if this service gets me to save even more in the long run I’m all for it. I much prefer real cash over real pennies…
- UPDATE – 8/13/15: Digit now pays out interest-like money!!! They call it “Cash Bonuses” which sounds a lot better to me, but it’s pretty much the same thing. And although it’s not much, it still beats out the national average by a margin. As of right now, they’re giving out these “cash bonuses” in the amount of $0.05 per $100 saved in your account for 3 months. And it’s all automatic – for old members like me, as well as all new ones too. Again, nothing that will make you rich, but neither will interest at your current account either.
- It takes a business day to get your money back. I like this one and I also hate it. But I only hate it because I wish it were 5 days, or even 10 to force me to leave it alone and save more! Haha… You may feel differently, however.
- If you don’t have that much money, you won’t save as much money (but you’ll still save). Digit can’t create income out of the blue, but it can still work it’s magic and save you *something* every month so it’s still worth considering to see how it matches with your own efforts. If you’ve been even efforting at all (new word!).
There’s no way to keep a certain amount off limits in your checking account.UPDATE: You can now tell Digit not to save any money if your checking balance hits a certain minimum! Just text in “minimum” and it’ll ask you how much you want to keep off-limits. I just did it for $500 as I like to have padding in my checking just in case I slip up somewhere… This is also great if your bank charges you a fee for not having a certain balance in there (though I advise you to go find a better bank if that’s the case ;))
- If you don’t have/like text messaging, you won’t be able to do much. You can still attach your checking account with them and start saving money as long as text is enabled (it’s part of the authorization process), but you won’t be able to check on some of the other actions like withdrawing or pausing, etc. Though, maybe that’s a good thing? ;) [UPDATE: As of March 8, 2016 there’s now an iPhone app!]
- Digit’s US-based only right now. Though they do have plans on expanding internationally.
- Not all banks/credit unions work yet. They’re aligned with 2,500 of them so far, but not all.
- Some banks with stricter security takes longer to start saving with. Like USAA, for example, who I use for checking. On one hand I love that about USAA, but on the other it can slow things down when dealing with outside applications. This $10.94 hit my Digit account this morning – a full week after signing up (Digit says they have improvements in the works for this stuff, and USAA specifically, as they’re constantly tweaking things to move more smoothly).
Here’s a 60 sec video on Digit if you want to learn more:
And, Lastly, Here’s my One-on-One with Ethan Bloch – Founder of Digit:
J$: What made you come up with such an interesting idea?
I have been obsessed with personal finance since I got my first bit of cash at my Bar Mitzvah. I invested most of this money and by age 15 I had seen my net worth triple and then go to $0.00, thanks to the Internet and telecom bubbles.
This early experience of managing my own money set me on a lifelong journey in search of the truths underlying the financial realm. Once my first company Flowtown was acquired I had the mental space to arrive at a question I found no one else was asking: “How could we help people maximize their money, while at the same time driving the amount of time and effort it takes to do so as close to 0 minutes per year as possible.” This question eventually led to a prototype that automatically assessed your cashflow and put money aside when it thought you could afford to and not feel it.
J$: How much money have you already saved yourself with Digit?
As of this morning $7,720.05 (since January 2014).
(The difference from the top number vs the bottom is due to taking out money for a vacation)
J$: I know you can’t spill the secrets, but how generally does this robot (aka algorithm) know what amounts to take, and when?
Every week day Digit looks at your checking balance and asks itself a bunch of questions including: Is this a high or low balance based on how this person makes and spends money? Do they have any bills coming due in the next several days? Will they have any income in the next several days? How much money did they spend yesterday? How much did they spend over the previous several days? How much have they saved so far this month? After answering questions like these Digit then tries to arrive at a small amount of money it knows you don’t need but more importantly might not feel is missing based on recent spending and income.
J$: Can you help my body automate working out, please? :)
I wish. There are so many similarities between financial health and physical health though. Both dramatically impact the arc of our lives. Both require large amounts of self control.
However the big difference is finance has become completely electron based, aside from physical currency, it’s all 1s and 0s in a database somewhere. This data can then be assessed, crunched and acted upon by a computer which means for the first time many financial tasks can be automated. We’ve been seeing this for years in high finance with quant and black box trading but now this technology is being brought to the individual.
J$: You and I’ve talked about the exciting vision you have for Digit and some of the cool features in the pipeline. Are you able to share some of that with us here today?
If you look at the retail bank experience there’s so many things that are painful and annoying. Saving and the savings account is just one of the many banking experiences that hasn’t really changed in about 400 years and we chose to start with savings because its the corner stone of financial stability. But there’s no reason every other aspect can’t be automated intelligently i.e. retirement, credit cards, over draft protection to name a few.
J$: You sold your previous company for a hefty sum. How do you personally track/manage your own money now? Do you use software or prefer going old school with spreadsheets as I do?
Spreadsheet FTW. I have an interlaced “God view” spreadsheet I update once per month. Most of my invested dollars are in Vanguard Index funds.
J$: As a big fan of both technology and finance, this last question’s going to be a hard one… Who’s sexier – Warren Buffett or Bill Gates? ;)
That is a hard one. If I’m only voting sexy, I would have to choose Gates. He’s younger ;) And what he’s doing and will do in philanthropy, I think will eclipse the achievements of any business person in the history of humankind. That’s sexy. However for me personally Warren Buffett has been a bigger direct influence in my life, my character and how I conduct myself. Most days don’t go by without me asking myself “what would Warren do?”
That’s Digit in a (Not-So-Short) Nutshell.
Again, I’m pimping it hard because I find it to be genius :) But of course there’s plenty of info here for you to form your own opinions… If it is something you want to try out and see how much you can save, here’s what to do:
- Visit Digit.co
- Connect your checking account
- Start saving!
It really is that simple. Questions/comments/concerns, leave ’em below and I’ll have Ethan (the founder/CEO) answer if I can’t myself. A pretty interesting idea regardless, don’t you think?
UPDATE #2: Digit now has an iPhone app!
PS: In full disclosure I’m now an “adviser” to Digit which shows you how much I love them ;) All links above are affiliate links meaning I’ll receive compensation if you end up signing up (five dollars). Please know that I’d never promote the crap out of a product I don’t love or use myself, so everything written above is totally genuine. If you don’t like Digit, don’t sign up! And if you do, you’ll also be able to refer a friend and get a bonus as well.
* Y Combinator is a startup accelerator run by legendary VC Paul Graham that’s SUPER hard to get into. And I know this because I’ve tried twice and been rejected both times, haha… To give you an idea of the talent that goes through there, some of the companies that have catapulted out of YC have been Reddit, AirBnB, Dropbox, Hipmunk, Scribd, Disqus, Weebly, Colour Lovers and Teespring.