Do you remember when you used to have a change jar by the front door, and when you came home you put your loose change in it?
It was a way of saving a little for those extras.
Now, with so much use of credit and debit cards, this way of saving has fallen into disuse.
But technology springs to the rescue, with apps that automatically save your “spare change” for you, from your daily spending or otherwise. They take away small amounts from your accounts and save it separately in a virtual piggy bank.
You wouldn’t use any of these for a savings goal, but they’ll get you enough to treat yourself at the end of the year.
What will I learn?
Digit aims to help you save more, and doesn’t limit itself to simply taking the balance to the next whole dollar from your purchases. It is said to use complex algorithms that figure out what you can afford from what you pay in and withdraw from your bank account, then it takes out the money in a way that “won’t be noticed”.
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That means it’s not limited to less than a dollar, like Acorns, but may take out as much as $50 at the time.
Interestingly, it doesn’t invest your money, but simply holds it for you.
This is intentional, as Digit does not charge for its service, but makes its income by earning interest on your money.
So really it’s a painless way of saving if you find it hard to discipline yourself to do it.
If you’re worried about it, you should note that Digit watches your account and won’t take any money if you are likely to overdraw your account, in fact, it has a “no overdraft guarantee”.
Anytime you want to take out some money, you simply text “W” plus the amount and you’ll get it within one business day.
Most of the business is run through texts, where you can find out your current balance and tell Digit if you wanted to be more or less aggressive in the amounts it withdraws.
As another approach to saving and investing, Lawnmower takes your spare change, just like Acorns, but puts it into bitcoins.
Bitcoin is a currency system invented in recent years which actually has no bank notes or coins, and just exists on the Internet. There is no central bank, and transactions take place peer-to-peer.
It’s best described as a decentralized digital currency.
If you have seen anything about bitcoin recently, you probably know that its values in real currency vary dramatically, with investors/speculators making and losing fortunes. But if you’ve heard about bitcoin and were fascinated enough to want to try investing in it, it could be that using Lawnmower, which takes only your spare change, provides a relatively risk-free method.
Just like Acorns, Lawnmower rounds your purchases up to the nearest whole dollar and takes the change.
You can link it to multiple accounts, including credit cards, debit cards, and bank accounts.
Whenever the amount it has taken reaches a minimum of $6, Lawnmower will buy bitcoins for you through Coinbase.com, which is a bitcoin trading website called a digital wallet.
The effect of this is that you are buying bitcoins gradually using a dollar cost averaging strategy, getting more when they are cheap and less when they are expensive, which will tend to smooth out the value fluctuations.
Lawnmower doesn’t charge for its services, but there is a Coinbase fee of 1% for money in or out of your virtual wallet.
Acorns takes your spare change and automatically puts it in an investment for you.
Whatever you spend on your debit card, Acorns rounds it up to the next whole dollar and puts the change in a portfolio in your name.
For instance, if you spend $4.23, your account will be debited $5 and $0.77 will go into your Acorns savings portfolio.
The money is invested in $5 increments in one of a selection of 5 portfolios, which range from conservative to aggressive.
The portfolios are made up of stock and bond ETFs.
There is a charge of $1 per month for the service if you have less than $5000 in your portfolio. There are also small charges associated with ETFs.
At less than a dollar each time you make a purchase, you may think it would take a long time to save $5000. But Acorns can also be used as a regular saving program, taking automatic deposits from your account on a daily, weekly, or monthly basis.
The Bottom Line
If you like the idea of getting a little bonus every few months, then you might want to try out the “invest your spare change” thing.
You generally shouldn’t take them as a substitute for proper saving, but can use the money saved for little indulgences.