If you have been around the personal finance blogging world, you may have heard of the concept of PYF – Pay Yourself First.
It’s based on behavioral science that says the best way to save money is to make it automatic. If you have access to it, then your nature is to spend it.
Simple as that.
That’s why when you save “from the top” as a payroll deduction from your 401k/403b, you 1) don’t really notice that your paycheck is smaller and 2) your retirement nest grows.
Now, imagine what you can do if you saved automatically to build your emergency savings account?
There is an app called Digit that works with a principle of PYF, but for your bank account. And it does it with very small amounts, like drops of water.
What is Digit?
Digit is a microsaving app on your phone.
I heard of itbecause a friend of mine in a personal finance group said it was the best app if you are a “bad saver.” It was featured on Penny Hoarder, Wallet Hacks, and had great reviews in my personal finance circles.
So I downloaded it and took it for a spin.
How Digit works
To start, download Digit on your phone, enter in your phone number, a six-digit security code they give you, and link your bank account.
Digit will look at your payroll, past expenses, and use its own algorithm to determine how much you can afford to save — the algorithm is the magic. (I haven’t seen technology that does this so well.) It will then automatically pull that amount of money from your bank account and into a FDIC-insured Digit bank account.
From the Digit bank account, you can transfer to your real bank account, which takes 2-3 days.
My initial concerns and how they were addressed
As I was using it, my biggest concern was overdraft fees because if it did that just once, it would get DELETED and I would write a bad review to warn people to stay away.
But there is a “no overdraft” guarantee 😀
Not only that, it learned so much about me that it adjusted when my spending habits changed or when my income went up or down.
I never, ever, ever overdrafted or missed the money that it saved in the Digit bank account.
All Digit’s commands are through text commands
Digit works through text commands.
Type in “withdraw X” and it will withdraw X amount from your Digit bank account to your real bank account.
Type “pause” and you can shut off automatic savings any time you want.
You get the idea.
How I use Digit to save
I am a freelance personal finance writer and a family finance blogger, but I am no wizard. I still have trouble saving up just like regular people.
It’s hard because we keep getting hit with random expenses. Our emergency fund gets used for its purpose, but it’s still disheartening.
When we recently had to book a hotel for my husband to present his research, I decided to dip into my Digit.
It showed that I had saved a little over $500, which accumulated in about four months. This was super nice because I did not notice or miss all those tiny drips of savings that accumulated to $500. It was enough for all of us to go and make a family vacation out of it.
I then texted:
And it transferred $500 into my real bank account.
$500 showed up in my real bank account within 2-3 days. I book our hotel as a family.
In the end, I did not have to dip into our normal bank accounts to do that.
Digit costs to use
The first 100 days are free, then it’s a $2.99 per month service fee.
You also get a 1% cash-back bonus on the balance in your account for every 3 months you saved with Digit. In other words — if you have about $300 over three months, that will “cover” the monthly fee.
You also get $5 bonus for each friend you refer (links in this post are referral links).
My verdict of Digit
This is an honest review.
I think $2.99 per month service fee is steep if you are a family on a single income while still in residency or fellowship training. It’s an amazing app, but it’s not “$35.99-per-year” great. You have to save $300 in three months to “cover” the monthly fee of the app, which would probably be too hard for you.
So, I give it a 2/10. It would earn 6 more points for a 10/10 if it wasn’t pricey. That was the deal breaker.
If you are dual income or done with training, the money you save is a nice surprise. Think of it this way: it is the digital equivalent of washing a pair of pants and finding a $100 bill in my pocket.
If having that can boost your joy, then you will love this app. I give it a 8/10. It would earn two extra points for a 10/10 if they skipped the whole Digit savings account step and deposited directly into your real bank account instead.
The worse thing that can happen is I can see really busy users ignoring their text messages and forgetting they even have Digit, and getting a four-digit savings “surprise” in a year. If you do not ignore all the text messages from Digit, this won’t happen to you.
If you’re still in training, skip this app. Not worth the money.
If you’re dual income or done with training, it’s really nice as a “you won’t ever notice” savings tool. Within four months, I had $500 in my account and I did not miss it.
Take it for a spin for FREE for the first 100 days and see how you like it.