Digit: Save money without thinking about it | Hacker News Reader

Digit: Save money without thinking about it

digit.co

74 pointsJhsto80 comments

I remember when this came up on my Facebook feed a year or so ago. I shat all over it because they were essentially taking money in, calling it "saving" and then not paying out any interest.

Have they fixed that? Sort of. They now pay a $0.05 "savings bonus" for every $100 you hold with them for 3 months, for an annualized interest rate of 0.2%. Needless to say, the savings bonus won't go up when interest rates go up: it is a "savings bonus" and not an interest rate, after all.

Let's call this what this is: a gimmicky savings account with a crappy APY. Call me when their savings algorithm is mated with an automatic investment in my choice of low cost mutual funds.

I've come to think savings interest is bullshit. In the past, whenever I calculated how much I'd earn in interest if I put away a decent part of my salary every month, it was always shockingly low, and this put me off saving.

Now I think of saving purely as a way to put money out of my immediate reach. For me, the reason for saving £200/month is simply that after a year I'll have £2.4k, not so I can get a paltry amount of interest on top of that.

From this point of view, all that matters in a savings account is customer service and what you call gimmicks. I would definitely try out this service if it came to the UK.

I totally accept some people may choose to give their finances the time and attention necessary to earn real interest, but for me saving is just paying future-me some money.

Now I think of saving purely as a way to put money out of my immediate reach.

That's how I save. I call my hack the "No Budget Budget" and wrote an ebook about it to explain my method: https://leanpub.com/nobudgetbudget

I might be mistaken, but I think this is also how YNAB encourages people to use their Savings accounts.

Agreed, interest has ceased to mean anything significant. And don't forget to report your pitiful interest as ordinary income on your taxes! (Well, Americans at least; in the UK they tabulate that for you and don't make you figure it out yourself on top.)

Eh, some online banks give good interests like Ally with 1% savings. It's not as good as investing but it is easy and significantly more than any major bank.

"Good" should be qualified here. That's still significantly less than average US historical inflation.

Ally gives a crappy return. It's just less crappy than other banks.

The concept of "saving" does not make sense past the point of a 6 month emergency fund (for _most_ people's financial needs). All of that money should be buying investments not sitting in some database losing value over time.

Because he's using pounds, I assume he is in the UK, where you can get 3%-5% in current accounts within certain limits. Even on a relatively small amount of savings, those amounts are decent enough to worry about, and it certainly makes sense to park your money in the most appropriate place. It literally takes about 2 minutes to find the best rate (with MoneySavingExpert, for example).

Example: saving £200/month, with 3% interest compounded monthly - after a year you'll have saved £2,400 and earned £40 interest.

Ok, day to day, £40 is real money.

But £2.4k vs £2.44k, over a year of your life? I don't agree that's worth worrying about. Not if worrying about finding the best rate means choosing a bank with shit customer service or a shit website etc, which could ultimately lead to indecision, inaction, and saving less money. Maybe you're more disciplined than me though :)

Ally is also compounded daily, instead of monthly like most low-end savings accounts.

That's why it's called savings and not investment (I realise in some economic sense they are equivalent).

We have been engaged in collective madness over investment/savings returns. I remember conversations (probably 2007ish) where I was trying to point out to a banker that the nominal return cannot exceed inflation in the long run. How is it that pension funds can be predicated on a 6-8% return. Well it only works if we have a 1) a crash every so often wiping out everyones gains or 2) hyper inflation (or 3 some other people just giving money away).

In fact we seem to have reached a somewhat contradictory outcome where assets inflated once, and then we continue to live with low returns and inflated assets (some people would have it that the baby boomers are protecting their wealth), the zombie japanese economy mode.

It is a somewhat arbitrary and feudal system of haves and have nots. You bought a house at the right place/time? Well you're a millionaire now (even if you paid nothing but intrest on the mortgage). Anyway it would seem to make a mockery of the economic precepts by which the modern economy is supposed to run.

I have always been pro-crash (even more so anti-boom).

> I was trying to point out to a banker that the nominal return cannot exceed inflation in the long run

Someone should point out that this line of reasoning is just flat wrong for reasons obvious to any first year economics student.

Whilst it sounded cute, an actual explanation would have been great. Mind expanding?

It's not a zero-sum game, there are more assets now than when we all lived in mud huts or roamed the plains in search of food. Were there to be no real returns to investment we would all have just been trading around the same fixed amount of assets for the last 10,000 years, which is of course nonsensical.

His argument is that nominal returns adjusted for inflation in the long run average to zero. Which is saying that there is no such thing as a real return to investment. However that is incorrect, as investing in productive assets can increase the world's net wealth and productive capacity.

As one can observe by the vast increase in our collective productive capacity from the stone age through the present day.

He's actually correct if you're talking strictly about the monetary framework. That we are as a society collectively richer (i.e. we have more stuff) is indisputable - but if you get into how the stuff is priced, and what happens to those prices over time, as more stuff is produced, and the money supply grows at the same time, it gets decidedly murky as to what prices and value even mean.

His point however was not about stuff, it was about return on savings i.e. payments in money of money. That is indeed bounded.

Substitute inflation for wage inflation. It's not that there are no returns, but that the rate of return is completely decoupled from reality. Productivity growth is what (1-2%)? Real terms wage inflation is what (~0% since the 70s).

Productivity growth is just a part of the equation. You have population growth and several other factors.

Total wealth is not fixed over time. If you spend X resources making a solar panel and it produces X + Y resources over it's lifetime there is a net gain of resources even ignoring money.

At scale investment returns are bound by GDP growth and how much of those returns are spent.

"where I was trying to point out to a banker that the nominal return cannot exceed inflation in the long run. ".

Sorry, but i hope you realise now you're wrong and I hope the banker explained why.

It should read monetary supply inflation, not basket of goods inflation.

The greater point is how can ordinary expected returns exceed productivity growth, normal monetary supply inflation and indeed gdp growth.

> We have been engaged in collective madness over investment/savings returns. I remember conversations (probably 2007ish) where I was trying to point out to a banker that the nominal return cannot exceed inflation in the long run. How is it that pension funds can be predicated on a 6-8% return. Well it only works if we have a 1) a crash every so often wiping out everyones gains or 2) hyper inflation (or 3 some other people just giving money away).

We live in a world with increasing productivity which is the X factor you are looking for. For an amazing amount of time we have been able to make more stuff with less work which generates huge returns. That's not to say it is infinite, but it does allow pensions to get 6-8% returns without a crash or hyperinflation.

If you haven't already you should read Thomas Piketty' Capital in the Twenty-First Century.

>"the nominal return cannot exceed inflation in the long run"

Shouldn't that read "inflation + GDP growth rate" ? That's how long term investments in stocks are estimated.

In 2005, when online savings were paying 5%, i would agree.

Now, "high yield" savings pays 0.75%, and normal banks are 0.1% or less. If something like this helps you avoid spending, it's probably worth it.

You're missing one huge benefit of this, and honestly it seems like they are too. For me, the biggest draw of a service like this is keeping your savings relatively inaccessible. Whatever money they're holding for you can only be accessed with a ~24 hour delay, which gives you pause before you blow it on something stupid, but is still quick enough for emergency use. They should really push this as a feature. They should make the delay arbitrarily configurable. They could have an option where you have to ask for a withdraw twice with a delay in between. They could even have an option where you have to explain what you need the money for. They could have a human send you an SMS trying to talk you out of any stupid purchases, but even just writing an explanation to /dev/null would help a lot of people avoid impulse buys.

Plus, 0.2% APY is still better than my savings account pays.

I think that is a bit harsh. Some people find saving very difficult. Interest rates are rock-bottom anyway. This is a service which, for a small fee, helps you to save if you are really bad at it. It's not for me, but I can see this being a starting point for someone who has never managed to save successfully.

> for a small fee

It claims to be free

It is, like google is free.

Isn't that what Acorns does? http://acorns.com/

I wasn't aware of them -- but yes, it is.

0.25% in fees is kind of rich for a pure passthrough service, though.

anything charged as a percentage is a scam; and yet many industries are fully based on it (e.g. property). There is no justification in almost all services to charge a percentage where no risk is assumed.

It's about ability to pay. Of course it's extremely unlikely for a realtor to do $30k worth of work to sell a $1 million house. But they're also going to work to sell that $60k house and they will probably put in more than $1,800 worth of their time.

Having a flat fee would make it practically impossible for the poor or even lower middle class to sell their homes without having to write a check for the privilege.

> But they're also going to work to sell that $60k house and they will probably put in more than $1,800 worth of their time.

I find this uncommon. Many cheaper houses (<100k) in Atlanta won't be supported by Zillow. Similarly, cheaper homes will not have many pictures, sometimes just a street view picture. And if you do call a realtor to look at these, they vet you much more thoroughly than a 200-300k house.

Have you looked at interest rates lately? No one even wants deposits these days.

I don't see anything in the FAQ about Digit being FDIC-insured so that when they go bankrupt or get hacked, I'll have some chance of getting my money back.

This:

https://help.digit.co/hc/en-us/articles/203931308-What-happe...

might be the least reassuring response possible to that question. And it's explicitly contradicted by this response:

https://help.digit.co/hc/en-us/articles/217382378-How-does-D...

> Today, we make money like a traditional bank does, by accruing interest on the savings we hold for you.

If Digit is making interest on (my) money, then said funds are probably in a commercial bank account in Digit's name somewhere. If said funds are in a commercial bank account in Digit's name somewhere, bankruptcy is going to FREEZE those funds. They aren't going to be transferred back to me. And Digit's investors are going to have every reason to argue that said funds SHOULD be available to pay off Digit's debts.

Don't use this.

Digit takes advantage of FDIC pass through insurance. Your money is separate from Digit's money. If Digit goes bankrupt, your money still belongs to you, not to Digit's investors.

Disclaimer: I don't work for Digit, but have been doing a lot of research in this area.

They're probably striping cash across multiple banks in order to maximize FDIC coverage. If the money is lost from the backend, they'll be made whole.

The rest of their business model reeks, though.

Indeed. Plus a traditional bank makes money from the interest paid on its loans, and then pays interest on its savings.

You'd be surprised how broken/misallocated the consumer deposit market is.

Because of current market conditions, it is costing the large banks money to hold your money. There is excess deposits beyond what they are able/want to lend out. Some banks are actively trying to shed deposits by charging fees and other methods [1].

For large depositors, some of these banks are actually charging the customers to hold their money [2]

On the other hand, smaller commercial lending banks are having a hard time attracting deposits.

[1] https://www.pwc.com/us/en/financial-services/publications/vi... [2] http://www.wsj.com/articles/big-banks-to-americas-companies-...

Why not just leave it in the checking account and not spend it?

Actually, who is so irresponsible with their money that it's a wise choice to let some random shell company periodically suck out an indeterminate amount of money that they think you won't notice, and promise to give back if you ask them for it?

Reminds me of those Wall Street executives that give women access to their bank accounts so they can boss them around with it. They'll give him an 'allowance' to pay their bills or a 'bonus' if he obeys her. I think the term is 'Financial Domination'.

Knowing someone in a relationship where they are a significantly higher earner than their gf, I've had an interesting conversation with them about what you refer to as "financial domination."

From their standpoint, it makes sense to a degree. If they see their relationship moving forward to the point they get married, he realistically earns enough where she would not have to work and eventually be a stay at home mom. That's a huge luxury in and of itself these days for a young couple. However it would probably be more unfair if she was only given money when she asked permission for it. So agreeing on some sort of "salary" (or "allowance" as you called it) of money that she can spend on herself or save as she sees fit, no questions asked, can actually be freeing in many ways. I think many people, were they to have the option of not having to work and being given regular spending money would take it in a heartbeat.

Not saying it is right or wrong, just that it isn't a black and white issue, and at least in this case, they both are having open discussions about it.

Of course if you're becoming a full-time mom it's not quite the same as not having to work. People who aren't moms charge in the neighborhood of 30k a year to full-time manage other people's kids.

complete bonkers. What is the added value? Sure, here is my bank account and my financial history, please go have your way with it.

If you're responding to the part about the financial domination, those people usually submit to it because they find it sexually gratifying.

My bank has this feature. It basically rounds up to the nearest $5 when I use my card and put that money in a separate account. Was really useful and nice to have some spare fun-money every month, but I ended up draining the account every time it reached ~$150. After I started using YNAB it was just too much overhead, now I consciously save towards my savings goals when paycheck arrives.

Perhaps you can name and fame this bank. Sounds like a great feature to incentive more savings.

We should start thinking in terms of investing rather than in terms of savings.

Bank of America has a similar program called "Keep the Change".

https://www.bankofamerica.com/deposits/manage/keep-the-chang...

Too bad it's BoA.

Are people so out of touch with their economic situation that they are unable to save on their own? Really not a fan of this, just another attack vector/demographic information gathering waste of cpu cycles.

Agreed, these "financial solutions" are starting to remind me of "dieting solutions."

I'm pretty bad at spending money, and this is kind of how I have gotten myself to save more -- not Digit, but the 'squirrel away money so you dont think about it' strategy. I keep an eye on my main bank account, but I have about 5 other accounts all deducting from it at various points in the month. Some goes to (autoinvested) stocks, some goes nonliquid LendingClun, some goes to a few other bank accounts.

My goal is to try to keep the main account 'floating', because while that floats, the other ships rise. In practice, I tend to keep a float for a bit, then splurge and have to bring money back in. The one thing I think that is helping me with this is YNAB. Forcing me to prebudget (and then to deduct from other budgets if I overspend) has made me much more conscious of habits.

Based on the comments here that HN is not the right audience for Digit. It's also worth noting that HN is not representative of the majority of the population in the country. CFSI has quite a bit of research on the financial health in the country [1]. Services, like Digit and Even [even.me], solve a problem that many of us don't face.

I'm curious how the HN population manage your money. Do people differentiate between savings and investing? How are people saving? Are people seeking yield/greater return?

Also, what tools/apps do you guys use/like?

[1] http://www.cfsinnovation.com/Document-Library/Understanding-...

I'm pretty sure that Adobe auto-enrolled me into a Vanguard Target Retirement 2050 Fund 401k after 60 days of employment. Also, I put 25% of my income in to ESPP (purchase stocks at a guaranteed 15% discount with a lock-in price for two years, so if the stock goes up, it's 15% + whatever the stock increase is). This has been by far my most successful investment (because I was buying at 38 and selling at 72-94 for two years).

I also have a chunk of cash set aside for when they finally realize I'm a useless employee and can me (while I search for a new job). I also am trying to time the market, which I've been told is a bad idea and impossible, but I haven't done the research to actually know this for sure. I've sold all of my stocks that I can anticipating another large market correction (look at the S&P 500 graph and assume that the past will influence the future, which is also crazy) with the intent to re-enter the market at the bottom of the correction.

While it sounds like you've been lucky thus far, the brightest economic minds are pretty much in agreement that for Joe Investor (and most people for that matter), trying to time the market is a fool's bet, so you can save yourself the research there.

This would be cute if it was someone's Show HN doing something clever with banking API into their own savings account.

Apart from that I genuinely don't see the appeal.

Oh, and they're using the longest image alt text I ever saw - Each blog post is duplicated into the alt text.

One man's "saving money" is another man's "robbery".

Set up a scheduled transfer from your checking account to your own savings account if you can't manage your own money. Don't encourage these kind of rip-off merchants.

> Every few days, Digit checks your spending habits and removes a few dollars from your checking account if you can afford it.

Is this what we've come to with our personal economy? The need for an app to withdraw money for us because we're either too lazy or too scared to setup automated withdrawals or proper budgets?

And its not even invested. It's just shuffled around.

> Is this what we've come to with our personal economy?

No, we have not. Nobody is going to use this service.

Likely the sense of saving has been erased from most peoples minds.

Are these folks just redressing "auto-scheduled direct transfer to a savings account" in new emperor's clothing?

Based on the comments, HN is obviously not the target audience.

I would say that a vast percentage of Americans do live paycheck to paycheck (or close enough) to value this service.

To value them randomly extracting money from my account and holding it in their own accounts for whatever? Are you saying the vast percentage of Americans are sheep who are so bad with money they'd rather have someone rob them repeatedly of small amounts of money in hopes of someday getting it back?

Alexis Ohanian, Investor, Digit & Executive Chairman, Reddit

Dogecoin ?

I don't see the appeal of this. Can't you just decide that (for example) you're going to spend only 75% of your monthly income and save the other 25%? At least that's what I do.

Clearly some people have zero self control. I've heard of people managing to "save" that 25% but afterwards they can't control themselves enough to not dip into it when their current reserves are gone.

They say they're confident they won't put you into an overdraft but limit the number of times they'll pay for putting you into one to 2 times. That doesn't sound confident.

I dunno, I just got my employer to split my paycheck so part of it goes into my savings account. Don't have to think about it, and it works pretty well for me to then have my Roth IRA pull from that account.

Assuming I actually live long enough to retire, I should wind up with around a million dollars. Hopefully inflation or the market doesn't wipe that out, but I don't have much control over that.

I noticed that my employer had a few empty account numbers on the direct deposit form. So I had a few hundred per month directed into a savings account, on top of a 10% 401k deduction. I've been thinking about upping that, but I'm still saving without consciously choosing to do so for every paycheck.

My bank, (EVO, a Spanish bank) does something similar-ish. Once a month they move any balance in my current account above 3,000 EUR into a savings account. Yes there is interest, and yes it is minimal.

I much prefer this approach than having a separate company getting involved.

“For those of you who just can’t be trusted to not blow your allowance. It's not condescending, we swear.”

“Do you keep track of your finances? That’s great because we’ll be withdrawing random amounts into your 'piggy bank' at random times … and maybe even our 'piggy bank' once or twice ;)”

“Do you work for Yelp! and still find yourself blowing all your money on luxury whiskeys and restaurant food? Let us help you with your backup plan before getting yourself fired for calling your boss a spoiled brat, you spoiled brat.”

“Does being an adult with a bank account make you angry? Would you prefer it if mommy took care of your money for you? We’re here to help!”

“Do you accidentally blast 300$ on open bar tabs every Friday night and need that to stop? Give us access to your bank account so we can save you from yourself.”

“Isn’t having so much money that you don’t care if 50$ just disappears for no reason every week just great? Let us help you pretend to be productive with that money by placing it in a negative interest rate savings account!”

"Are you incapable of stopping until it's all gone? We're alcoholics, ahem, compulsive spenders as well. Give the bottle back, Father Jack."

"Do things like 'stocks' and 'bonds' sound scary? Do you think 'gold' and 'silver' are pointless fads? Wish money would stop getting highbrow ideas? We do to, why make your money work for you when you can send it to work for us? Errr... I mean, why make your money work, when you can send it on a tropical vacation?!"

If this kind of stuff moved the money into another account of mine, this would sound great but I'm just handing it to some random company that I've never heard of? Sounds safe...

I'll just continue to have a recurring transfer setup from my checking to my savings... Thanks.

Interesting idea, but unless you are living paycheck-to-paycheck (and presumably if you have any savings at all you aren't), why not just set up a standing order and adjust it if it turns out to be too high or low. Takes about 20 seconds.

this is what i do

I tried it out, but my biggest complaint was after withdrawing money, Digit immediately started taking out money again.

If one withdraws money, they might not want it being sucked back out immediately.

The vitriol and negativity in this thread makes me really not want to share my things here.

Beware: I didn't think about it, and I didn't save any money.

Wow - saving for suckas

I've found digit to be quite useful :)

I guess automated 401k payroll deductions is the ultimate form of this sort of philosophy.

Not quite - a 401k could either lower your taxable income now by accepting pre-tax contributions, or offer you tax-free returns on your investment in the case of a Roth. This savings service definitely does neither.

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