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How will you pay for your next financial emergency? A few months ago I took my car in for what I expected was around a $300 repair, but the bill totaled over $1100!
For most people, without an emergency fund that would be a serious hit to your checking account. Not having the cash, and putting unexpected emergencies on a credit card is the trap that locks millions of people into the paycheck to paycheck lifestyle.
Because you know there’ll be another expense before you pay this one off.
That’s why I decided to try the smartphone app, Digit. Here’s why Digit can help:
According to a CNBC study, about 57 million citizens have no emergency fund. And the two most common reasons?
- People get accustomed their salary and expenses so by the end of the month there’s almost nothing to spare – not even $25 to $50 to deposit into an emergency fund.
- It’s extra work. You’d need to open another account and remember to deposit into it each month.
So Digit’s aim was to take almost all the effort out of building an emergency fund and help you to grow it so you barely even notice the money you’re depositing into it.
Digit App Review for 2020
How Does Digit Work?
Once you install the free app, Digit will walk you through the simple setup. It’ll set up a separate FDIC insured account for you. Then Digit will analyze your checking account, and periodically transfer small amounts to your emergency fund.
This is where Digit surprised me. For such a simple looking app, I thought it would prompt me for a set amount to transfer, maybe once a week. But it’s smarter than that.
When Digit analyzes your checking account, it learns the pattern of your deposits and withdrawals. Then it’ll transfer small amounts to your emergency fund every few days, but only when it sees you can afford it.
So it’ll never cause an overdraft – in fact they guarantee it.
Digit texts me every single morning around 9 AM, showing me the balance of my checking account, and how much it changed from yesterday. If I want to know what transactions caused it to change, I just reply by texting ‘recent‘ and Digit will reply with the last three transactions to hit my account.
You’d be putting your emergency fund on automatic pilot, but in a way that you could check at any time, and where you’re not agonizing over the deposits.
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How Does Digit Decide How Much it Will Transfer?
Once you install Digit, it’ll analyze your checking account. It sees when you have regular deposits, and it learns what bills you pay, and what times of the month they occur.
So Digit will learn your average balance, and will know when it’s a bit higher or lower. This is important because you wouldn’t want transfers to your emergency fund to interfere with your regular expenses. For the record, that’s never been an issue for me.
What surprised me, was how quickly my emergency fund reached several hundred dollars. Most of my transfers were less than $15, but the consistency of them is the key.
Really, Digit analyzes my account closer than I do. But you still have complete control over it and you can always transfer money back to your checking account if you want.
How Do I Communicate with Digit?
Digit is a smartphone app, so it responds to simple texts. Here’s a few of the most common commands I’ve used:
- Savings – Digit will respond with the balance in my Digit emergency fund account.
- Pause 5 – Digit will stop transferring anything for the next 5 days (or any number you specify). Then 1 day before resuming, it’ll give me a heads up to make sure I’m ready to resume.
- Withdraw 50 – Digit will transfer $50 back to my checking account (you can specify any amount).
- Recent – Digit will respond with the last 3 transactions to hit my checking account.
- Minimum 100 – You can specify any number and Digit won’t transfer anything if your checking balance reaches that number.
Do I Need to Open an Account?
No. When you sign up for Digit, you’d attach your checking account, but you don’t have to open a separate account. Digit will automatically open an account for you.
How Much Does Digit Cost?
Digit is free for the first 100 days, then they charge $2.99 per month. So if you’re deciding whether that’s worth it, consider two things:
- How much are you saving now for emergencies? If Digit can save you more than $2.99, and guarantee that you’ll put money away every month, then it’s a no-brainer.
- How have you paid for emergencies in the past? Have you needed to put them on a credit card, or pay with money earmarked for bills?
Is the Account Insured?
Yes. The money in your Digit account is FDIC insured up to $250,000.
Can You Contact Digit Easily?
Sure. There’s a toll-free contact number right in the app’s dashboard.
Want to See it in Action? Check it Out Here
Our Digit Review Summary
We all know that living with a budget and having an emergency fund are keys to moving past paycheck to paycheck life. But 78% of us still live paycheck to paycheck our entire life.
A big reason for that, is that we don’t understand one key part:
A budget and an emergency fund need to be used simultaneously, but they need to be separate.
Emergencies can’t be paid from budgeted money, because budgets are for predictable expenses. A sudden $800 car repair is gonna really complicate most budgets.
That’s why so many people conclude that budgets don’t work, and they continue to struggle with never-ending debt.
We automate so many other inconsequential parts of our lives – coffeemakers, alarms, thermostats, ice makers, even Amazon Alexa. They save time in our day, but they’re all trivial tasks.
For such a simple app, Digit has made a big difference in our finances. Right now, our second car is an older Honda with over 200,000 miles on it. I know it’s just a matter of time before I’ll need to make a repair, but I’m not worried at all. Because I know when I need to, the money’s there in my emergency fund.
If you have no emergency fund now, and especially if you’re struggling with debt, I’d recommend checking out Digit. Because once you can pay for emergencies with cash, budgeting and paying off debt will suddenly become much easier.