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Let’s face it. Not everyone is great at saving money. But what if you could save money without even noticing? There are two apps, Acorns and Digit that promise just that! They both work from the same premise. By transferring small amounts of money in increments, the user will slowly build savings that they otherwise may not have had. Over time, that savings can really add up. But while the goal of both apps is the same, the methods they use to get there are a bit different. So which one is better? Acorns or Digit? Here is some additional information to help you make your decision.
How does Acorns work?
Acorns is the first savings app that I tried. I started using Acorns about 2 years ago. The set up is very easy. You download the app here, and then connect your bank. To connect your bank, you are actually signing in through your bank, not Acorns, so the process is secure. It is similar to using Facebook or your Google account to create an account elsewhere. Once you have signed up, you have a couple of options for saving. First up are recurring transfers. With recurring transfers, you are telling Acorns to transfer a set amount of money on a schedule. You can set up transfers for as low as $5, this is great for those who don’t have a ton of extra money after bills. The other option is to activate Round Ups. You’ve probably heard of Round Ups before. For every transaction on your linked account, the value of the transaction is rounded up to the next dollar. With Acorns, when it reaches $5, the app automatically transfers the amount to your Acorns account. While the Round Ups are a great way to save, you do have to be careful. If you are one to run your account low, you do run the risk of overdrafting the account, which of course leads to additional fees. In this situation you may want to leave the round ups off until you are maintaining a higher balance.
How does Acorns Invest my Money?
The key difference between Acorns and Digit is that Acorns is actually an investment account. The great part about Acorns is that it opens up the world of investing to a much broader audience. Typically an investment will require a minimum investment (usually at least $500, often times more), which is out of reach for many people. Acorns takes all of the money that it manages and aggregates it to invest in a variety of Exchange Traded Funds (ETF’s). This gives more individuals the opportunity for better returns on their savings. However, since it is market-based, you can also lose money in an Acorns account. When you sign up, there is a risk profile type quiz to help Acorns invest your money with risk you are comfortable with.
How much does Acorns cost?
Acorns charges a $1 monthly fee for accounts under $5000. Accounts over $5000 are charged .25% annually. The cost is actually very low when you consider the transaction and management costs that are associated with a traditional brokerage account. Depending on how much your account earns in interest, you may also be subject to taxes. This, however, is no different than any other type of investment earnings. For the casual investor it should not be a concern.
How does Digit work?
Digit works a little bit differently. Digit is a savings account. It is FDIC insured up to $250,000 like any other bank savings account. This means that when you save with Digit there is no investment risk. The account set-up process for Digit is similar to Acorns. First you download the app here and sign up. You will connect your bank the same way you do for Acorns. Account set up is where the similarities end. Digit uses logic to determine how much you can comfortably save based on your balance, what it anticipates as approaching bills, when you will get paid and your spending habits. It then transfers the amounts to the savings account. Digit seems like it would be a great option for those who have regular income and regular expenses. Most users report that Digit takes small amounts from their checking account adding up to, on average $25-$50/month. My personal experience has been a bit different. My income is not consistent and ebbs and flows. I am not paid on a regular schedule. Therefore it seems that Digit has trouble figuring me out. It has withdrawn anywhere from $7 – $150. The good news is that I have saved nearly $1,000 in about two months. The bad news is that I can’t predict at all what Digit thinks I can “comfortably” save. Unlike Acorns, Digit offers a “no overdraft” guarantee and will reimburse fees associated with overdrafts twice.
What does Digit do with my Money?
Digit holds your money in a FDIC-insured Savings Account. There is no risk of losing money with Digit. It is an excellent option for those who are not comfortable with investing in a market that goes up and down.
How much does Digit cost?
The first 100 days of Digit are free. After that, Digit charges $2.99/month. On smaller accounts, this can be a bit painful. For example, if you saved $250 over a year you would pay $36 in fees, making the rate close to 14%. With Acorns, the fee would be closer to 5%. As your account grown larger though, the fee becomes more palatable.
Which is better? Acorns or Digit?
I think the answer varies by individual. Personally, I like Acorns. I have a $20 weekly transfer set up and the round-ups going. My goal is to have at least $1,000 saved by Christmas for Holiday Shopping. I started back up in January and have saved $454 ($240 in recurring transfers & the remaining in Round Ups). As I mentioned earlier, I have saved $1000 through March with Digit. Although that is great, I am a bit uncomfortable with the variability around the withdrawals. I like to know what’s coming. I am probably not the norm though. Typically people are paid a predictable amount in regular intervals and have consistent expenses. The final decision probably comes down to whether or not you are comfortable with market investing or if you are willing to pay a higher fee for some additional piece of mind. Both apps do offer one significant benefit. Unlike a Savings Account that is linked to your Checking, transfers back to your account are not instant. That means you have to give taking the money out more thought which is likely to reduce the impulse purchases that often impede savings to begin with. All in all, I highly recommend both apps as a good way to save for smaller savings goals like the Holidays or Vacation. As an aside, I am also giving Qapital a shot – so far it appears to be more like Acorns, but you can segment out your goals a bit more and it also can analyze your spending (eek!) – more to come as I get more experience with it!
To sign up for Acorns, click here.
To sign up for Digit, click here.
To try Qapital, sign up here.