Given that emergency expenses are both unforeseen and urgent, it’s important to start thinking about tomorrow by beginning to save today. A new breed of savings apps can help.
Saving money is hard. I’m not referring to the money you save when you buy something on sale or the number listed on your receipt from the grocery store that says “you saved $24.92 today.” That sort of saving is simple; but real savings for your future is much more complex.
Consider some recent survey findings:
- Americans have a household savings rate of 4.9 percent while many European countries are above 10 percent
- One in three Americans has no retirement savings at all
- 60 percent of Americans have less than $1,000 in their savings account
- 34 percent of Americans say they could not come up with $2,000 by next month to pay for an unexpected expense
For the growing number of self-employed Americans without employer-sponsored retirement plans or consistent direct deposits, personal savings might be even lower.
Smart Ways To Start Saving
Most apps help you spend money – not save it — with streamlined “one touch” checkout experiences. Amazon even offers a wi-fi enabled button you can place around your home and press it anytime you want to re-order your favorite products.
But there is a new brood of apps to help you save money. The mentality of “live for today and forget about tomorrow” is pervasive but not obligatory. If you want to boost your personal savings, consider a savings app that fits within your existing routines.
Micro Investing: Acorns
Acorns rounds up each purchase you make to the nearest dollar and deposits the quarters, dimes, nickels and pennies into an investment account. Once you sign up and give Acorns permission to access your bank account, the act of saving is automated. The investments are relatively low-risk with higher returns than a savings account. Acorns charges a dollar per month plus 0.5 percent of funds invested.
If the fees put you off, consider Bank of America’s Keep the Change Savings Program. It uses the same spare change concept but Bank of America deposits the funds into your savings account instead of an investment account.
Friendly Budgeting: Level Money
Level Money is a free mobile app powered by Capital One. It helps you plan ahead for essentials like rent and bills and lets you set a target savings goal. The surplus beyond essentials and savings is your “spendable” money.
By linking your bank account data, the app looks for recurring expenses to automate the task of building a budget. Once you get started, the app visualizes how much “spendable” money you have remaining so that you aren’t dipping into savings without knowing it.
Savings Coach: Digit
Digit monitors your spending each day and moves funds from your checking account to your Digit savings account. Its algorithm tries to understand your lifestyle and save accordingly, instead of a traditional approach where you move a fixed amount of funds from checking to savings each month.
Digit is free but there’s a catch: the interest you earn on the savings is lower than your current savings account. So, if Digit is the difference between saving and not saving, go for it! But, you are better off financially to move the funds from checking to savings yourself.
Robo Investing: Betterment
Betterment is an automated investing service that you can treat like a personal savings account. You can transfer funds from your bank account to your Betterment account at any time or set up recurring transfers. The funds are invested in a low-cost portfolio of stocks and bonds.
The service costs 0.25 percent of funds invested, and you can set up savings goals that are customized for you – such as retirement, safety net, real estate or emergency funds.
Disclosure: Although I am not affiliated with them, I use Betterment to achieve my annual savings goals. I have not used Acorns, Level Money or Digit.
Which Service Is Best Fit For You?
It depends on how much you want to save, for what purpose, and how much involvement you want. If you’re like most Americans, you’re a few months or years behind on your savings plans.
Regardless of which app or service you choose, there is a straight-forward commitment you can make to savings:
- Set a savings goal: Decide how much you want to save overall for this year.
- Make a savings plan: Calculate how much and how often you need to save to meet your savings goal.
- Automate the act of saving: Utilize technology to do the work for you. It saves you time and ensures you stay disciplined.
Given that emergency expenses are both unforeseen and urgent, it’s important to start thinking about tomorrow by beginning to save today.
Photo credit: Shutterstock / Chones
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