Digit Is The Best Way To Painlessly Save For Near-Future Splurges
The new app learns your spending and earning patterns, and takes out a few bucks when it will hurt the least.
Most adolescent enterprises have an appropriately amateur vibe: construction-paper advertising, piggy bank capital, and profits in the single digits. But a 13 year-old Ethan Bloch—now the founder and CEO of the auto-saving app, Digit—refused to get stuck in that sticky, Elmer’s world and instead invested his $7,000 in Bar Mitzvah money in tech stocks. Because the year was 1998, the value of those stocks tripled in a matter of months before falling to zero by the year 2000.
That experience—the huge gains, the crushing loss—sparked an interest in the intricacies of banking which led Bloch to found Digit, a start-up that is determined to help you accrue savings. The model: a no-fee, and no-interest, service that draws savings out of your account without you noticing. By monitoring your deposits and spending, Digit removes small amounts at times when you’re flush, so you don’t feel the pinch.
Knowing that in any given year, over 60% of American save no money whatsoever, Bloch and his team wanted Digit to all but eliminate logistical and financial barriers to saving. The service is no-fee and sign-up took, in my experience, under two minutes. Plus, rather than creating an original app, Digit communicates balances and notifications via text, and users can respond and direct Digit to save more, save less, or transfer money back into a checking account.
Digit isn’t the only auto-saving app around. A competitor, Acorns, rounds up the change from each purchase you make on a credit or debit card and adds that amount to an investment portfolio. (It charges a $1/month, plus a percentage of earnings between .5% and .25%.) When asked about Digit’s no-interest savings account, Bloch noted that the company was immediately focused simply on growing their customer base, but that eventually, a sizable number of users would allow Digit to negotiate better interest rates with banks, and pass some of those earnings on to customers. The takeaway: eventually, Digit will be a no-fee savings app that earns you interest.
Speaking of interest, Bloch noted that it can often come at cost—some large banks, while they pay over $1 billion in interest to their customers, earn many times more annually in fee revenue. The sum of that arithmetic is not in consumers’ favor. And though he acknowledged the banks’ might, Bloch isn’t concerned about aTwitter-to-Meerkat-style aggressive assault. While Digit’s algorithm isn’t patented, it is complex, proprietary, and secret. Plus, as the service gains users the algorithm is enhanced, further propelling Digit ahead of potential competitors.
That’s Digit: young (literally: all employees are under 30), lean, financial services app that really wants you to start a savings account. (And, become a profitable company in its own right.) While, ideally, people should make timely deposits in an interest-bearing account, the reality is that most don’t. Between no savings, and non-interest bearing savings, the choice is pretty clear. While Digit is unsuitable as a long-term savings plan (fund your retirement elsewhere), as a way to passively save up a few hundred for a weekend away from the city, it’s superlative.
Photos by Hello Digit