I have always been a fan of automated savings, but sometimes getting things setup can be a challenge. How much should I save? How often should transfers take place? Do I enter a fixed dollar amount or a percentage? How do I know I will not accidentally overdraft my accounts?
What is Digit?
Digit is a new startup from San Francisco with a belief that bad habits create an unnecessary hardship when dealing with your personal finances. To solve that problem, they found a way to take our bad habits out of the equation.
Digit is a savings tool that automatically takes care of your savings for you with small transfers from your checking account into a Digit savings account every few days. You don’t do anything, it just saves money away for you.
How it Works
When you sign up for Digit, you connect the service to your checking account. Digit monitors your activity and sends you occasional updates via text message to let you know if a big deposit came in or a big expense cleared your account.
Every few days, Digit makes a withdrawal from you checking and deposits the cash into a Digit savings account. Digit calculates the amount based on your spending habits and your account balance. The company has a no overdraft guarantee and they will pay you back for an overdraft fee if they cause a problem.
In the month that I’ve been using the site, I have had withdrawals ranging from as small as $2.58 and as large as $24.12. Most withdrawals range between $5 and $50, and they are designed to avoid causing any hardship or problems with your regular spending habits.
You control everything via text message. If you want to see your Digit savings balance, checking account balance, recent transactions, or upcoming bills, you just send a simple text message command to Digit and they will respond with the information you requested.
You can also pause your savings or make adjustments by texting “pause” or “settings” to the Digit number. If you want to force an extra savings transfer, you just text “save” to Digit. If you want to withdraw back into your checking, send the withdraw command and the funds show back up in your savings the next day. It couldn’t be simpler.
How to Sign Up
I use Digit myself and happily suggest it to anyone as a great way to up your savings. The only downside I have found is that you do not earn interest on your Digit savings, but it is completely free and interest rates are really low anyway, so it comes out in the wash.
To sign up, just head to Digit and link your checking account. The entire process took me less than two minutes. And, in about a month I have saved $147.80. It was painless and I have that money stashed away for an IRA contribution, a vacation, an emergency, or a rainy day.