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By now, you have probably read the viral article by Neal Gabler in The Atlantic, “The Secret Shame of Middle-Class Americans.” If not, I encourage you to read it today and develop a greater sense of just how dire the outlook is for many American families today.
According to Gabler, a recent Federal Reserve Board survey revealed that a staggering 47 percent of responders indicated that they would pay for a $400 emergency by either borrowing, selling something, or they would not be able to pull together $400 at all.
Without a doubt, this statistic is alarming; in what is the most-advanced (by most standards) country in the world, nearly half of its citizenry finds itself in full-blown economic crisis. Call it what you will: financial illiteracy, money mismanagement, or simple stupidity. But do not question the veracity of this statistic.
As Gabler notes, a 2014 Bankrate survey indicated “that only 38 percent of Americans could cover a $1,000 emergency-room visit” using savings. And lest you think this is a simple problem of lack of liquidity, Gabler addresses that, too: Edward Wolff, an economist at NYU, found that the average inflation-adjusted net worth of families had dwindled to $54,500 in 2013.
Not only are Americans way behind in saving for emergencies and other unexpected expenses, but we are way behind in retirement investing to boot.
Why Can’t Americans Save?
For a number of reasons, Americans lag behind most of the rest of the developed world in saving money. Chief among these reasons: debt. According to a recent Motley Fool article, the average American household owes $90,336. Keep in mind, this averaged is decidedly-lowered by the select households that carry no debt. The average household with debt owes over $130,000 including mortgage-debt. When the average family shells out 9 percent of its annual income towards interest on debt, it should come as no surprise that saving is a challenge.
Unfortunately, debt is not the sole reason for the poor savings habits of Americans. A quick look around reveals that lifestyle is also to blame. The Greatest Generation, the Silent Generation, and Baby Boomers compared themselves to co-workers and neighbors who were likely to possess similar financial means. Naturally, these comparisons drove spending. The aspirations of the poor to raise spending in order to live a “better life” became the new standard over time.
Today, Generation Xers and Millennials compare themselves to flavor of the week reality TV stars and the extremely wealthy and spend accordingly. Psychologists commonly refer to this phenomenon as social comparison, competitive acquisition, or upscale spending. And when a high spender who earns $50,000 is constantly comparing himself to a “peer” who earns $150,000 or more, an unsustainable level of catch-up consumerism is reached.
The rapid pace of our current culture is also to blame. We sign 24-month auto leases because cars aren’t new enough to be driven past that point. We spend over $1,000 on the latest smart phone. The “standard” is perpetually being raised due to the latest must-have upgrades.
How can the average family save money in the face of these cultural challenges?
Automated Saving With Digit – A Solution to Savings Struggles
Digit is a free savings service that helps you save money without any ongoing action on the part of the user. After signing-up and linking your checking account (and enjoying the 128-bit bank-level security of Digit’s interface), Digit does the rest!
How, exactly, does it work?
As the above video states, Digit carefully analyzes your spending over time and makes periodic transfers from your checking account to your Digit savings account. These transfers typically occur every 2-3 days and range from $5-50, according to the company.
Digit is so confident that their service will never cause an overdraft they provide a no-overdraft guarantee.
Your Digit savings account is accessible any time via a simple text message interface. If you should wish to transfer your saved funds back to your checking account, a simple text command will ensure that your money is transferred back to your checking account the next business day.
When you sign-up and refer others to Digit, you receive a $5 commission for every referred sign-up.
Ever the skeptic, I dragged my feet for a long time before signing-up with Digit. And I also waited a few hours after signing-up to link my checking account to my Digit account. You might say I had cold feet.
After signing-up, I was quickly impressed by the simplicity and user-friendliness of the Digit platform. In a matter of moments, I received the following text message from Digit:
After saving the new contact information and returning to the Digit Dashboard on my PC, I linked my checking account with a few simple clicks. Then I received another friendly text message:
For a few moments, I not-so-patiently awaited the first automated transfer by Digit, but it didn’t come immediately. While I understand that it will take time for Digit to analyze my account and begin automatic transfers, I wanted to see what the manual savings function looked like via text. I quickly saved $10.00 manually, as can be seen in the screen capture below:
Common Questions About Digit
Like I did, you probably have several questions about Digit. My research revealed the following answers:
-How much does it cost? Digit is FREE.
–Will I earn interest? Technically, you will not earn interest; instead, you will receive periodic Savings Bonuses from Digit. Every 3 months you will receive a bonus based upon your average Digit savings balance over the previous 3 month period. For every $100 you keep in your Digit savings account, you earn a 5 cent Saving Bonus.
–How does Digit make money? Remember, Digit is free and does not hide any fees. Digit makes money much like traditional brick-and-mortar or online banks: they accrue interest on the funds held for their customers.
–Are my savings insured? What if Digit goes bankrupt? Your digit savings are FDIC insured up to $250,000; furthermore, Digit is backed by a team of eight investors, including Google Ventures. Simply put: your money is very safe.
–How easily can I get my money back? Again, withdrawing money from your Digit savings account is as simple as sending a few text messages. By sending the command “Withdraw” to Digit and responding by indicating an amount to transfer, your money will be on its way back to your checking account. Currently, transfers are unlimited.
-Is there a Digit app? Yes. It is available in the App Store and Google Play Store. The iPhone app is very easy to use.
–Is my bank supported by Digit? It is most likely supported by Digit; currently, over 2,500 banks and credit unions are supported by Digit in the United States.
–What should I use my Digit savings to accomplish? This one is entirely up to you and your goals and values. I am planning to use your Digit account to save for a fall vacation. You could use it to house your emergency fund, sinking fund accounts, or other savings goals. Savings could be used on a monthly or quarterly basis to make additional debt payments. Think big and be creative!
Why Use Digit?
If you are like most Americans, saving money is challenging. Digit eliminates all difficulty and does the work for you! It is a safe platform, and joining is 100% risk free. If you don’t like it, the worst consequence will be the need to transfer your money back to your checking account. Oh, and you might actually make some money from referring your friends; what a bummer!
If it seems like I am plugging Digit with unusual intensity, it’s because I am! I believe that a free product that can help anyone deserves to be promoted and that you, as a reader, deserve to experience ease in an additional area of your finances.
If you are intrigued by what you’ve read about Digit thus far, I encourage you to sign-up by following the steps below.
1. Visit Digit and create a new account.
2. Link your checking account with your Digit Savings account.
3. Download the Digit app for your smartphone.
4. You’re ready to save money!
Full disclosure: If you sign-up for Digit by clocking on any of the links provided in this article, I will earn $5.00; you, too, can earn this referral bonus yourself after you sign-up by referring friends and family using your own referral code.
Readers, what barriers do you face when striving to save money? How have you overcome them? Do you use Digit? Share about your experience in the comments section below.