Can a Robot Called Digit Really Help You Save More?


The frugal living world is full of exhortations to save more for emergencies, to save for important purchases, to save for big life goals. Along with that comes lots and lots of advice about how to trim costs, earn more, and to budget and plan. Despite all of that, Americans still don't save as much as they should —  60% of us don't have enough set aside for even minor emergencies like a car repair or an emergency visit to the dentist.

So why don't we save when we know we should? Because even though it seems easy, saving money actually isn't that simple.

Digit Is Designed to Make Saving Easy

Digit is a free smartphone app that analyzes a connected checking account and makes periodic withdrawals to a separate, Digit-controlled savings account. The algorithm monitors spending and income habits to determine the size and frequency of the transfers. They are generally small ($15 to $20) and occur once or twice a week. Individual transfers are capped at $150.

Most interaction with the service is via mobile text. Every morning Digit sends an account update with details about recent transactions and current balance. Users can send texts to issue commands and check balances, too. There's also a clean and simple website interface.

I've Saved $58.75 in Two Weeks With Digit

After I got over some squeamishness about letting a mysterious algorithm connect to my checking account and begin transferring funds, I signed up through the website (it's easy, of course) and waited for Digit to do its thing. The first transfer, for $6.50, came about a week later. A handful of transfers have followed since (they seem to come in pairs, about a week apart), and I've amassed a tidy little nest egg of $58.75. When it reaches $100, I'll transfer it back to my checking account and from there into my savings account. Woo-hoo! An extra hundred bucks in my vacation fund.

What I Like About Digit

Here's why I'll probably keep my Digit account live even after I've written this review.

It's Easy

Setting up an automatic transfer between a checking account and a savings account is easy. Digit is easier, and works alongside my current transfers to help me find extra money to put aside for whatever. Signup is quick and painless. The interface is simple, clear, and direct. The list of commands is short and to the point.

It Sends Me Daily Text Updates

I try to check in with my banking and credit accounts every couple of days to see where my money's going and to keep an eye out for mistakes or erroneous charges. Unfortunately, sometimes life happens, and I may not check in for a couple of weeks. Digit sends me an update every morning with account balance and transaction details. It doesn't seem like much, but it goes a long way toward keeping money and personal finance "top-of-mind." I'm thinking more about my money, and that's good.

Digit's Designers Are Thinking About Psychology

Digit doesn't ask me how much money I would like to save — it just does it, based on my financial habits. Compare that with an automatic transfer between accounts. The user has to make the decision to save, the decision to set up the accounts, and finally the decision on the amount of money to withhold. Each of those decisions are "opt-in" moments, which are surprisingly difficult to overcome. The last one is especially difficult because in addition to opt-in, we have to overcome "loss aversion," which is what psychologists call our reluctance to give up what we have in order to gain something else. When you set up an automatic transfer between checking and savings, you have to decide how much to give up from spending now in order to gain some savings later. That's hard.

Digit doesn't eliminate all the "opt-in" obstacles (you still have to click a link and sign up, after all), but it does help us get over loss aversion. Once you're in, you're saving.

What I Dislike About Digit

Digit does a lot of things right, but not everything.

Digit Interacts With My Checking Account

It felt really weird at first to let a third-party service transfer money out of my checking account — automatically. Digit's designers have recognized that this is a tall hurdle for some people. They insist the algorithm will never cause a user's checking account to become overdrawn, and they offer an overdraft guarantee, just in case. So far, nobody's had to take them up on it.

My Money With Digit Doesn't Earn Any Interest

Funds transferred and held in Digit's savings account do not earn interest. Of course, funds in my checking account and regular bank savings account earn only paltry interest, so maybe that's a wash. In any case, this is how Digit keeps the service free and pays themselves — they are capturing the interest instead of passing it to users.

Also, transferring money out of my Digit savings account and back to my checking account takes about a day. (Meanwhile, transfers out of my PayPal account can take up to five.)

Digit's Psychology Can Work Against Me, Too

Speaking of getting my money out of Digit, the process is more like transferring funds between checking and savings accounts. It's all manual, with some "opt-ins" and a big "loss aversion" moment to overcome at the end. Automatic withdrawals back to my checking account — or even my savings account — based on preset goals met would be a nice feature. Maybe they'll add that in the future.

A Few More Details About Digit

If you're considering trying out Digit, you should know a few more things. (There's lots more at Digit's FAQ.)

Funds Are FDIC Insured up to $250k

Digit holds users' money at Wells Fargo or BofI Federal Bank, both of which are FDIC insured.

It Works With Most US Banks and Credit Unions

Digit is United States only currently, and while most major banks and credit unions are covered, not all are.

Passwords Are Anonymized and Secure

Digit claims they adhere to industry standards with respect to password and user data security.

Signing Up for Digit

If you'd like to signup for Digit, you can do so, right here, in just a few moments. Once you've spent some time with it come back and share your experience in comments.

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