Startups in finance technology, often called FinTech, are exploding. It seems a new tool launches each day in an effort to help Americans handle debt or simplify investing or address the distressing lack of personal finance knowledge among the general population.
While not all products will succeed, the three startups below have managed to gain popularity and provide useful money tools to get Americans on the right financial track.
Digit
Seeking to solve the age-old “I just can’t save” excuse, Digit provides a free way to automate saving a few bucks at a time.
Users create an account and link Digit to their checking account. It sounds terrifying at first, but Digit uses 128-bit bank-level security and all funds are FDIC insured up to $250,000.
Digit then uses an algorithm to monitor spending and pulls out small chunks of money to transfer into your Digit savings account. These transactions will be coded as “Hello Digit Inc” by your bank and could be a small amount like $1.50 or a larger $50 transfer. The company provides an overdraft protection guarantee, where if a Digit transaction ever forces you to overdraft, Digit will reimburse the charge levied by your bank.
This subtle movement of money makes it simple for people to automate saving, even if it’s just a little bit a month, without seeing drastic chunks gone from checking.
Digit can also provide daily texts with your checking account balance as well as weekly texts with your Digit savings balance. You can transfer money by simply texting “Transfer” to the Digit number and confirming how much you want transferred back into your checking account. You can also pause transfers at any time if you’re in a tough financial spot and can’t afford to have money withdrawn.
Unfortunately, Digit doesn’t offer a high interest rate on the money saved. You might be eligible for Digit Plus, which rewards you with 5 cents for every $100 left in your Digit account for three months. But that’s a paltry sum compared to banks that offer 1 percent APY on savings accounts. Instead, you can maximize your additional savings by cashing out your Digit account each month and transferring the money into a higher-yield savings account.
Not all banks can be linked to Digit, but currently over 2,500 banks and credit unions within the United States are supported.
Acorns
Acorns attempts to simplify investing in the way Digit promotes savings. Acorns currently works as an app on iOS and Android. Users download the app, sync it with a debit card and checking account or credit card, answer a few questions and Acorns will recommend a stock portfolio based on age, risk tolerance, time horizon and investment goals.
In order to fund this stock portfolio, Acorns rounds up all transactions to the nearest dollar and invests the difference. This spare change strategy means if you buy a latte for $4.50, Acorns will round up to $5 and invest 50 cents.
While this does provide a less terror-inducing way to dabble in the stock market, one criticism of Acorns is the fee associated with such small contributions. The fee structure seems low at $1 a month for accounts under $5,000 and 0.25 percent a year for portfolios over $5,000. However, if your transactions only result in about $15 invested a month, a $1 fee eats up about 6.7 percent of your investment. Obviously, the more you can invest, the less it eats up your bottom line.
It would also be important to primarily use the synced credit or debit cards to maximize the amount of spare change routed into your investment portfolio.
Similar to Digit, Acorns uses bank-level security, and the website and app are secured with 256-bit encryption. The Securities Investor Protection Corporation insures Acorns accounts up to $500,000.
Society of Grownups
Society of Grownups kicks it a bit old school, while appealing to millennials. Instead of being a snazzy app or an automated saving service, this brick-and-mortar location offers classes and events to break down barriers to financial education. But this isn’t your typical seminar. Some Society of Grownups classes and events take place over dinner and drinks (grownup drinks).
Classes are kept small and range in a variety of topics including: negotiating salaries, couples and money, handling student loans, budgeting and even travel.
The price of an event or class ranges from free to $40 depending on the topic. You can also purchase a 90-minute financial consultation with a certified financial planner for $100 or a 20-minute checkup for $20 (the first is free).
Society of Grownups is headquartered in Boston but plans to expand to Philadelphia and New York City as well as other locations in the South and West Coast. Society of Grownups was founded by MassMutual and is in the process of building out online courses and tools.
Editor’s Note: The author is a Digit user and blogs for Society of Grownups.
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3 FinTech Startups Making Saving and Investing Easier originally appeared on usnews.com
