When you’re starting your career, it takes a while to get your money into autopilot for financial independence. You’ll track your expenses and build a budget, and you’ll save and invest while you pay down your debt. You’ll set up your deductions to your Roth Thrift Savings Plan and your Roth IRA. After a few months, your bills will be regularly deducted from your checking account. Eventually, you’ll have everything running smoothly and you’ll simply tweak the numbers occasionally.
For most of us, financial autopilot is “good enough”. You’ll review your plan every few months and tinker with your asset allocation. You might decide to start saving for a large purchase or you might decide to pay off your debts more quickly. However, you’re also busy with family and career and the rest of your life. Maybe you’re not the type of person who reviews your checking account every day to decide whether to send a few more dollars to savings.
But Digit can do that for you.
It’s a simple proposal: every few days, Digit moves a few dollars from your checking account into your Digit escrow account. For free.
Digit’s algorithms track your income and spending and only transfer a part of the excess balance. They monitor your account balance, upcoming deposits, scheduled bills, and recent spending patterns. Even if your credit-card company sucks their payment out of your checking account without telling your bank, Digit will still note the expense and estimate next month’s payment.
Then Digit sweeps part of the excess to your Digit account– it could be as little as $2 per transfer. They guarantee that you’ll never bounce a check, and if they screw it up then they’ll pay any overdraft fees or late charges. It’s still your money, and you can pull it out of the escrow account any time you want. (Transfers take one business day.) Your “user interface” is SMS texting or Digit’s website, but you can ignore Digit for days or even weeks at a time. You might possibly earn a higher reward from your Digit account than from your bank or credit union.
It’s the perfect financial assistant for busy military Millennials. It works pretty well for us older servicemembers and veterans too. It can be used by anyone with a checking account.
Digit’s a fintech startup, and their financial model depends on signing up as many customers as they can as quickly as possible. They’re still small enough that I can swap a few e-mails with the founder to write this post, and they’re still hiring more staff. They’re going to struggle through the usual challenges of explosive growth and competition. But the company is executing their plan well enough to score nearly $14M of venture-capital financing.
They also have competition. For example, USAA banking customers can use the Savings Coach app to boost savings rates and automatically take a little money out of checking. That’s a very educational app because it gamifies your savings game with challenges and badges. Digit chose a different path with their texting interface that will practically chat with you, but you’ll feel the same warm glow of accomplishment as you text back & forth with Digit’s server. If you’re already using Savings Coach then Digit is a great addition to your financial toolbox.
As a startup, Digit is regulated just like any other financial institution. Your money on deposit with them is insured by the FDIC up to $250K. You can share your Digit account with your spouse or anyone else (just like a joint account) so that they can access it while you’re out of reach. If you decide to move your Digit money to your Roth IRA or another investment account then you can transfer it in a business day.
Digit’s services are perfect for your next deployment. Instead of building up a huge bill-paying buffer in your checking account (earning minimal interest) before you leave, you can let Digit worry about it. Sign up now (months before you deploy) and let Digit’s algorithms learn your earning and spending patterns. By the time you deploy (and leave your bandwidth behind), you’ll have your bills in autopay with your bank service. In between your pay deposits and paying the bills, Digit will cautiously chip away at the excess. When you get back to bandwidth (even if it’s “just” SMS texting), you’ll be able to text for an update on your Digit status more easily than logging into your checking account.
Or don’t bother checking in during the deployment: just let Digit run. Check your Digit balance when you return home and then (here’s the important part) put most of that pile of “found money” into your investments. Sure, treat yourself to a little homecoming party, but don’t feel entitled to blow all that forced savings on yet another consumer purchase. Leverage your deployment deprivation for your financial independence!
Digit is not just for deploying Millennials– it’s also for location-independent workers and perpetual-traveler retirees. I wish this interview had come together before our next 70 days in Spain, but when we return home I’m opening an account. I’ve cut back my financial tracking more than ever before, so in 2016 I’m going to let Digit’s algorithms get used to three credit cards and two mortgage payments. The next time we’re enjoying a slow-travel odyssey (perhaps on a bandwidth-limited cruise ship) I’ll let Digit worry about handling the excess.
How will you use Digit to simplify your financial life? Sign up with the link below, score a little free cash, and share your experience with the readers!
[Mahalo nui loa to J. Money for connecting me to Digit’s founder & CEO for this review! You’ll also see a lot of Digit reviews in the next few months because of their blogger affiliate program. I don’t have a referral account but you can use this link and then text “Refer” to your Digit account to earn your own $5 affiliate fee.]
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The only interest you get from Digit is 5 cents per $100 saved every 3 months. I’m pretty sure my checking account gets better interest than that.
Only way I could see myself using this would be to transfer the money to a savings account after it goes to Digit using their algorithm… a back door method of optimizing your checkings/savings.
Great point, Jay!
If you have the discipline (and make the time) for regularly transferring funds to a high-interest account, then that’s the more profitable approach.
The intriguing feature of Digit (and their competitors) is that the transfer out of your checking account is automated for people who otherwise might never get around to it. Instead of having to make decisions every payday or every month, they only have to move their Digit funds a few times a year. This is especially useful for deployments where the servicemember is out of touch by being underwater (submariners) or away from personal bandwidth (infantry, special forces).