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America has a savings problem. No, not the annoying habit of trying to save every country from themselves. That’s for another blog. The savings problem is that Americans are just not saving enough money.
The personal savings rate in 2015 was found to be 4.8%. This rate includes retirement account savings, such as a 401(k). Saving 5% into your 401(k) alone is not going to get most people anywhere close to a comfortable retirement, so this is a scary stat.
Another scary number? 62% of Americans have less than $1,000 in their savings account. This means that many many people in this country are not able to fork over $1,000 in case of an emergency. They will have to resort to credit cards or loans to make up the difference. And more debt is not the answer.
The answer: make saving automatic.
Automatic savings has been the backbone of my finances. Deductions from my paycheck into my 401(k). Monthly transfers from my checking account into my savings account. Direct debit monthly student loan payments, which also gives me a slight interest rate deduction.
The beauty of automating your finances is that the money goes where it needs to go. I never have to worry about it being spent or disappearing into the financial ether.
But if you have read any of my posts, especially some of the earlier gems like this one, you’ll know I’m not perfect. Some months may have different cash flow needs than usual, and as a result I have money just sitting in my checking account doing absolutely nothing.
This is where Digit has made a big impact in my life. I first heard about it while listening to an interview on the awesome Stacking Benjamins podcast a while back. I tried it and fell in love.
The basic idea behind Digit is that once you sign up and link your checking account, Digit uses some fancy algorithm to analyze your transactions. After a couple of days, it is able to determine how much you can safely save and sends that amount to your Digit account, which is FDIC insured.
If you happen to be spending a lot that month, Digit will adjust accordingly and not take as much money out of your checking. When you have some extra money sitting around, then they will save a little bit more. If your account happens to overdraw because of Digit, which is exceedingly rare, they will reimburse you for the fee.
Easy to Use
Accessing the money is easy. You can just use their new mobile app to withdraw funds back into your regular checking account, or their traditional way of communicating through text messaging. I use the texting currently because they update you periodically on how much you have in your Digit account and in your checking account. They also send funny pictures once in a while to keep things lively.
Once a month I will transfer the money from Digit into my emergency savings account. This gives me a little savings boost each month which I otherwise didn’t have.
It’s a nearly pain free way to save. It’s not useful for everyone, like those people who keep track of every single cent in their account (you know, THOSE people).
But it is a great service for those who have trouble saving anything, or those who would like to be a little more efficient with their savings, like me.
It’s risk free to try. If you’re not happy with it, you can just withdraw your money and close the account on their website.
Signing up is really easy:
- Join by clicking here and enter some demographic information
- Link your primary checking account
- Give Digit a few days to analyze your spending and enjoy the newfound savings!