Why I Refuse to Automate My Savings

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automate my savings“Save Money Without Even Thinking About It”: This is their motto. Digit is one of the first software packages out there that will study your spending patterns and move money into your savings account for you. Almost every personal finance blogger I know absolutely loves it. I, on the other hand, pretty much hate it and think you should too.

I absolutely 100% refuse to automate my savings with digit. I refuse to automate my savings not because Digit is doing something wrong or because their algorithm is faulty. In fact, all the reviews I read have been glowing and state that their product is doing exactly what it’s supposed to be doing. Their software is enabling people to save money that have otherwise never saved a dime in their life. However, is this product really helping us live the life of our dreams? Is getting money arbitrarily moved from my checking account to my savings account really going to create shock-waves of life and rebirth in my financials? I don’t think so.

Refusing to Automate My Savings

There are basically two reasons why I refuse to automate my savings through digit or any other software package. The first is a minor reason and the second is the big kahuna reason: first, the interest in the digit savings accounts sucks, and second, automation is causing me to think less, not more.

1) Interest on Savings is Terrible

I currently earn 3% on the money in my checking account. The digit savings account earns exactly 0.00%, so why in the world would I want to move my money from a high-interest account to a super-low interest account? It just doesn’t make any sense. I have control over my money and don’t spend it on a whim, so I would much rather just leave it in my checking account to earn hundreds of dollars a year.

automate my savings2) Causing You to Think Less

If you get to the end of each month and typically spend everything you earn (or more), then you have a pretty big problem, right? In this situation, do you think it would be wise for you to think less or more? Obviously, you should start thinking more.

In this scenario, you should be thinking about your earnings and your job. Perhaps you aren’t getting paid enough for what you do and should ask for a raise. Or, if that’s out of the question, then maybe you need to start entertaining the idea of working for another company that pays better. Maybe your issue isn’t your income though. It could be that you’re spending too much money when you eat out, or your car insurance costs are far above what they should be, but since you haven’t shopped around for a while you just don’t realize it.

Now, if you begin to let a software package put some money into your savings for you, what is going to happen? You’re probably going to smile in the mirror and say, “Oh good for me, I’m actually putting money in savings now. This is the first time I have seen $50 in my savings in the past five years. I am really doing great!” Your ego is lifted, your happiness level goes up, and you have a bounce in your step, but your brain is now turned off and your life really isn’t that radically different than it was just a few months ago. By automating your savings, you have done absolutely nothing to alter those bad habits or improve yourself through the good ones. Your small success is equivalent to a baby learning how to roll over. Sure, it’s a great thing, but wouldn’t you eventually want to see that baby walk?? By automating your savings, you are inadvertently keeping yourself from walking and kicking butt at personal finance. Instead, you have grown content to save $50 a year. And without changing any habits, you’ll likely blow that on one night at your favorite restaurant.

Choose to Change and Grow

automate my savingsThis whole Digit operation gets me pretty heated if you can’t tell. Pretty much digit thinks we’re all too stupid to save money on our own, so they have proposed a way to do it for us (mostly for their benefit, and only somewhat for ours). And unfortunately, this post will probably get thrown to the wayside because they are also paying personal finance bloggers to promote their product (which almost everyone is doing). So, in a nutshell, personal finance bloggers are earning money, Digit is earning money, the consumer is saving a few bucks, but each individual is actually worse off because their brain is completely turned off to the real possibilities that are out there beyond automated savings.

I urge you to do something different! Instead of blindly signing up with a service to save money for you, why not take it upon yourself to change your habits and grow? If you actually put in a valid effort toward your personal finances, think about what you could do! You could do so much more than just save a few dollars! You could take action and:

  • Cut your cable to save $100+ a month
  • Call your insurance company to get a better yearly rate
  • Decide to get rid of your ridiculously expensive car with payments and pick up a perfectly good used one with cash
  • Start shopping at discount grocery stores instead of going out to eat two or three times a week
  • Take all these savings and put them toward your credit card debt
  • Take classes with the time that you used to spend watching TV
  • Get a better job with a higher salary
  • Set an audacious goal and pay off your house!
  • Use the extra cash flow to invest 25% or more of your income
  • Retire early and wealthy
  • Give of your time and money to those in need

Doesn’t this sound infinitely better than letting a computer program automate $10 of savings to a digit account? Ummm, yeah, I think so. Do me a favor and share this article with your friends, because I have a hunch that most people won’t….if you catch my drift.

Will you refuse to automate your savings?

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Money Save Money

Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

19 Comments

  1. i haven’t used digit so I can’t talk on my experiences, but it sounds like the software would work great for someone who doesn’t have the willpower to actually save their own money. Just as an example I started taking the responibility of managing my girlfriends finances and found she automates everything including her credit cards. Unfortunately she sets everything up to have the minimum deducted every month which leaves the remaining balance to continue to grow (I’m quickly changing this). I think digit would work great for her if she didn’t have me as her CFO because it would just save for her automatically.

    I’m with you though, it sounds like a terrible program to use if you already save money manually so I couldn’t imagine automating anything with my financials.

    • Thanks for the comment, Ryan. I think you may have completely missed the point of this article, however. If I were you, I wouldn’t even introduce automated saving to your girlfriend because automating her other payments obviously hasn’t helped her in her finances thus far. In fact, it has actually hurt her because she is paying crazy interest through her credit card payments! Instead, she needs to learn about how to change her spending habits for good. That will be the only thing that helps her in the long run, and automated savings will only cause her to think less….

  2. My question is : Where do you earn 3% on your checking account? That is unheard of in these days.

      • The 3% interest rate is pretty insane – especially considering the 10 year treasury rate is 1.68%. I have to think that these banks/CUs are struggling and in desperate need of deposits, but I could be wrong (because I know you’ve had a high rate checking account for a while). I would be interested to compare credit card rewards versus “reward” checking accounts.

        For example:
        If you’re required to make so many purchases with your debit card each month and you’re capped at $10,000 earning 3% (totaling $25/month in interest), are you actually better off using a credit card for all of your purchases and earning more in the way of cash back?
        A Blinkin recently posted..Sample Investment Portfolios from the Experts

        • The high interest rate is actually pretty common among credit unions since they are technically member-owned and not corporate-owned like banks. My CU used to have 4% interest when I first started up with them four years ago, but they have since notched it down to 3%, but still good! I don’t foresee this getting reduced any time soon.

          As for the comparison to credit cards, it’s a little bit of a stretch. I use my debit card maybe 15 times a month with an average purchase of $5 or so. My credit card – I’ll use that for the bigger purchases, but still average only about $150 a month. In total, my card spending is somewhere between $225-$250. If I ditched the CU and tried to earn money solely with my credit card, I would earn approximately $30 a year ($250*12 months*1% earnings). By mixing in the CU debit card, I earn at least $300 a year plus whatever I earn with the credit card. Clearly the mix is a much better option for me. Interesting idea though!

  3. Haha… Yes, it seems people either love or hate Digit 😉

    You already know I love it, but I also use it on the side for a fun way to save even more while I’m already consciously saving/investing manually. I actually manually pay my mortgage and other bills as well simply to stay on top and “make it sting” more to appreciate it (not all bills, but the biggies like mortgage/rent/ and those dreaded taxes).

    Great post overall for sure.

    • Great point J$! As a fun way to save more money on the side, I definitely don’t have any issue with that. I just see all the people that never save any money anyway, and then they are brainwashed into thinking they are now doing a great job with their money, when they are effectively not really doing anything and still not that much better off than they were before.

  4. I’m in the same boat: I don’t entirely trust automation.

    Automating your finances has the benefit of not allowing you to override your own good judgment, and forces you to live below your means–which is a good thing for most people, who don’t want to think about their money (which may be why they have problems saving…)

    If you have enough discipline to avoid spending money unnecessarily, it can be smarter to use your head and make your own decisions about where to put your money.

    All this is to say that automation is a good thing for many people. That’s not true of everyone, like you or me, so everyone should do what he/she feels most comfortable with. But there’s certainly a case to be made for either approach!
    Froogal Stoodent recently posted..Pretend to Be Poor: Contentment, not investment, is the secret to financial freedom

    • So the moral of the story is, “do what feels right”? I don’t buy it. If people want to be much wealthier tomorrow than they are today, this just isn’t going to get them there. Their change has to be much more radical, and it seems that many don’t realize this. This savings automation is only increasing the thickness of the blinders and I don’t like it. Plain and simple.

  5. My concern is 1. No interest, they hold our money for free, 2. Is it possible they might take a few dollars and next thing I know I am overdrawn? Since I am ‘flying close to the edge’ while using extra pennies to pay debt, I just feel more comfortable using auto withdraw into my savings each pay period. Now if Digit starts paying out 5% I may reconsider.
    Dawn recently posted..Net Worth Feb, Good Bad & Ugly

    • Supposedly, they never lead you to overdraw from your account, and I believe it. Many of the withdrawals are very small and hardly noticeable. They did mention that they will likely pay some interest in the future, but even then I’m not convinced. People need to change their way of thought first, which will then lead to action, and ultimately to a better life. Without any change of thought, habits stay the same and the distant future will very much still resemble the life of today.

  6. I think it might be a good place for someone to start. If they need a swift kick in the pants, this might get them headed in the right direction. The best-case scenario would be for someone to see that auto savings start to add up. And then use that as motivation to engage their brain more to increase it more. I prefer to manually enter expenses for tracking so that it makes me fully aware of what we are spending. Same goes for saving. But surely it’s better than nothing…
    Mrs. Maroon recently posted..Don’t Treat Diet Like a Four-Letter Word – Same Goes for Budget

    • Maybe. Hopefully. I still think it’s more likely though that people will be excited see that they’re saving and then decide that that’s good enough. A small percentage might take the next step toward wealth, but I would say the majority would not change a thing since they already did practically nothing with the automated saver.

    • At least you’re thinking about it Gary! So many just assume it’s a great idea because everyone tells them it is. Thanks for commenting!

  7. This Digit thing sounds like the equivalent effect of claiming bankruptcy or taking out a line of credit on your home to pay your credit card debt: it doesn’t fix the underlying problem. What is going to prevent Digit users from tapping into their savings account to spend it on something wasteful instead of actually pretending it isn’t there? It sounds like Digit borrowed from the concept of saving your change. But how many times have users of that method found themselves counting quarters to buy a gallon of milk? There needs to be accountability for our spending habits and I have found that the best way to open up a persons mind to how they really are doing financially is to show them their income versus expenses. As soon as someone sees the numbers, it changes their perspective.

    • Exactly! Digit provides an on the surface, temporary solution to a much larger problem. People naturally think it’s great because they don’t have to do anything, but that’s exactly the problem. By refusing to change their thoughts, nothing will really change for them, which is really too bad.


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