Saving money automatically with Digit

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I recently wrote a blog post about how I have been using Acorns as a way to save money without thinking about it. Around the same time that I started with Acorns, I also decided to experiment with another automated saving application called Digit. Digit is a little bit different than Acorns in that instead of “rounding up,” it uses an algorithm to evaluate your bank account and automatically saves money into Digit when the algorithm determines that you will not need this money in your account. So far, it has been a great experience and has actually allowed me to save over $1,000 in just over six months. Like any money saving application, there are pros and cons, but first, let’s go through a quick overview of what Digit is and how it works.

What is digit?

Digit is a mobile savings platform that tracks your bank account activity and spending patterns, then decides for you how much money you are able to save. The is all based on an algorithm that the folks at Hello Digit, Inc. have built that is able to predict what you will spend each month based on your past habits.

How does it work?

When Digit determines that you are able to save a certain amount of money, it will transfer it into an FDIC insured account that uses start of the art security. Digit will check your account every few days and make small transfers, usually $5-$50, depending on your bank balance, income and spending habits. My biggest concern going into this was that Digit would end up taking too much money from my account, causing me to overdraft. But have no fear! Digit has a no overdraft guarantee where they will cover any overdraft fees (only for the first two times that it happens).

How does Digit make money?

This is an interesting part of Digit. Unlike many other saving apps, they don’t take any fees on the money that you deposit, but at the same time, they do not pay any interest to you. As a result, Digit is basically holding your money for free, keeping their own interest on that money. This is definitely the biggest knock on Digit.

While this lack of ability to grow your money is not as friendly as some other banking or investment products out there, I don’t see it as all that evil. I don’t love having my money tied up in an account where there is no potential for earning money, but at the same time, it is allowing me to save money without thinking too much about it. The way that I use it is to transfer the money out of my Digit account when it reaches a certain threshold, putting it into a place where it will allow me to grow that money as opposed to just saving it. Think of this app as the saving engine and another product like Acorns or a Vanguard total stock market index fund as the investment vehicle once I decide to transfer it over. So once my Digit account reaches around $1,500-$2,000, I plan on moving that over to a place where it will do a little more work for me.

Savings bonuses

While Digit does not actually pay you interest, they are still making an effort at helping you to grow your money. They award their users what they call “savings bonuses” which are granted every three months and give you $.05 for every $100 that you keep in your Digit account (on average). This gives you a .05% quarterly return, which won’t get you on the fast track to the Forbes list, but it is still slightly better than nothing.

Digit text notifications

As a bit of a tech geek, by far my favorite aspect of Digit (other than saving money without too much effort) is the simplicity of the app itself. It is built with a mobile-first approach and has an interface that is simpler than any other similar product that I have seen. Part of this user-friendly approach is the use of text notifications that you will receive daily from Digit. These text notifications include your daily bank balance, large deposit notifications and even cool animated GIFs to keep you pumped up about spending money. You can also reply to any of the text messages with certain commands that will give you more information on-demand, including:

    • “savings” – view your savings balance in your Digit account
    • “checking” view your checking balance with your bank
    • “recent” – view your recent checking transactions in your bank account
    • “bills” – view upcoming bills that Digit is aware of that will hit your bank account
    • “withdraw” – make a withdrawal from your digit savings account into your bank account
    • “save” – move money at any time into your digit savings account
    • “pause” – you can pause saving when you know of an unexpected expense or don’t feel comfortable with transfers
    • “notifications” – adjust your updates that they send you (to receive more or less)
    “commands” – view all possible commands so you know what you are doing when texting with Digit

Getting started with Digit

Signing up for Digit is a really simple process.

  1. Go to this link (aff) and click on any of the sign-up links
  2. You will need to provide your first name, last name, email address, password and cell phone number
  3. Link your checking account by providing your routing and account number. For me, I have my bank account number memorized, but didn’t know my routing number off the top of my head and couldn’t find my checkbook at that exact moment, so I simply searched my bank name and location and got the appropriate number from my friends at Google.
  4. You will need to confirm your account via SMS message. Digit will send you a code and you just need to drop that in on their site.

After that, you are all set! It will take a little while for their algorithms to understand your spending, earning and saving habits, and then will start to withdraw money after 3-5 days. You will be notified via SMS when it starts moving into your Digit account, or you can check it at any time using their website or texting them one of the commands I listed above.

My experience with Digit

I got started with Digit expecting it to either not have much of an impact on my savings goals or take way too much money and leave me over drafting every month. As usual, my fears were completely unwarranted. Since I signed up about six months ago, the app has taken 48 transfers from my bank account with an average transaction of $22 every three days or so. I have really enjoyed getting text notifications each day and always knowing where my checking account balance stands. This is a level of visibility that I have never had on my own, because I’m simply not the type of person that is wired to check my bank account balance every day.

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My favorite part of the experience has been how easy it has been to manage. Over the past six months, I have probably spent less than 15 total minutes, including signing up, thinking about my Digit balance. If I were trying to save money in this fashion on my own, it would have taken significantly longer and probably resulted in at least 2-3 overdraft charges from my bank. I have also referred two friends to the application and earned $5 for each of them, which was a nice added bonus for helping my friends with their own saving.

My recommendation with Digit would be to use the application, but recognize what it is good at and not good at. You don’t have a lot of control over what you are saving, so you will need to be comfortable with trusting the algorithm ninjas with your financial stability. You also should not plan to use it as your main home for the bulk of your money. Set a threshold beforehand and plan to transfer money to something with higher earning potential when you reach that number.

If you have any questions or want to give me feedback after you give it a shot, feel free to leave me a note in the comments or send me an email through the Contact page. Happy saving!


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