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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 $900! For most people, without an emergency fund that would be a serious hit to your checking account. Or if you don’t have the cash and need to charge it, that’s 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 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.
How Does it Work?
You’d spend a few minutes installing the app, then Digit will analyze your checking account, set up an emergency fund for you, and periodically transfer small amounts to your fund. Not big lump sums that’ll interfere with you paying your electric bill. Small increments that you’ll barely miss.
Digit texts me every single morning around 9 AM, telling 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 text back 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.
How Does Digit Decide How Much it’ll Transfer?
Digit will analyze your checking account deposits and withdrawals and then transfer small amounts only when it looks like you can afford it. It’s not just a simple formula where it takes a percentage each week.
Every few days the app will figure out whether your current balance is high or low depending on the past history. Digit will also figure out if you have any bills due in the next week, also based on your spending pattern. It’ll figure out if you have any income expected in the next few days, again, based on your deposit history. It’ll look at what you’ve spent over the last few days, and how much you’ve saved this month.
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. But you shouldn’t!
And they have a “no overdraft” guarantee where they’d cover any costs associated with an overdraft. But they also say that situation shouldn’t ever happen because their algorithm analyzes your account patterns to prevent it.
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 open a Digit 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 your current situation. How much are you saving? 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.
Is the Account Insured?
Yes. The money in your Digit account is FDIC insured up to $250,000.
How Would You Make a Withdrawal?
Digit is used primarily through smartphones and they have certain texting commands built in. For example:
- You can text ‘withdrawal’ to take money out or ‘balance’ to check your balance.
- If you wanted to pause any transfers to your emergency account for 7 days, you’d just text ‘pause 7’ .
- You can even text ‘bills’ to see your upcoming bills because Digit recognizes your pattern of bill paying and can give you a forecast.
- Another command I like is ‘minimum’. You can tell Digit not to transfer any money if your checking account reaches a certain minimum balance.
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
We automate so many other inconsequential parts of our lives – coffeemakers, alarms, bill paying, our thermostats, ice makers, even Amazon Alexa. They save time in our day, but they’re all trivial tasks.
Having an emergency fund is critical to moving from a debt-laden, paycheck to paycheck lifestyle to one where you’ll have money to invest for the future.
What convinced me to start using Digit was that I had always tried to keep some surplus in my checking account so I’d have enough for an emergency. But that’s an inefficient way to manage money.
Trying to keep an unknown buffer in your checking account forces you to play a never-ending guessing game. Is there enough there? Or what if you’re keeping too much of a buffer? That’s money that could have gone to savings. With a dedicated emergency fund, you have a much more predictable income and outgo from checking.
Even if you’re paying off debt, you still need to make the effort to set up an emergency fund. Suppose you’re paying $3000 in credit card bills. You’re struggling to make the payments so there’s probably no way you’re going to put $50 into an emergency fund each month.
Then suddenly you need tires on your car or a root canal where you’re responsible for part of it. Without an emergency fund, you’re probably going to add to that debt, prolonging your payoff. And the paycheck to paycheck trap.
Having a system that gradually drips money into your emergency fund will help you to eliminate debt because you won’t be adding to it. It’ll add predictability to your income and enable you to finally start saving.
I love getting my text every morning showing the balance of my account, and how much it’s changed since the prior day. And if I want to know the reason for the change, I just reply with “why”. In about 6 seconds, I get a text with the last 3 transactions. And seeing my emergency fund grow each month with almost no effort from me is pretty nice too. Check it out yourself and let me know how you like it.