Industry experts claim savings apps have the potential to revolutionize America’s finance sector by enhancing users’ awareness and control over their spending habits, turning them into savvy savers.
Over the past decade, mobile money apps have become increasingly sophisticated. They allow users to keep track of their money in real-time, check their spending, pay bills, and monitor their savings accounts. BlackRock’s head of digital wealth and iShares Joe Parkin explains that saving apps have made investing more convenient, as they enable users to invest at any time via seamless round-up technology.
With unparalleled acceleration in the development of AI-driven savings solutions, today’s savings apps boast full-spectrum functionality, with some nudging users toward healthier spending patterns and helping them switch to more competitive deals. For instance, apps Plum and Chip leverage AI to help members analyze their spending and reduce bills, while OpenMoney delivers personalized financial advice, helping users to manage their money better and save for the future.
In today’s gig economy, many workers have an irregular income. Round-up apps effectively sweep the user’s spare change into a virtual savings pot so they can save for their future automatically. As Plum cofounder and chief executive officer Victor Trokoudes explains, the world is changing fast, and the finance sector must keep up. Saving apps are an effective solution to fluctuating incomes and less predictable, hectic lives.
Today, forward-thinking financial institutions are joining forces with promising fintech startups, combining industry expertise with creative prowess to develop intuitive, easy-to-use financial products and services to help customers build wealth and make their lives easier.
Fintech’s agility and innovation have much to offer the banking industry. At the same time, traditional financial institutions offer vast market power, established networks, and decades of customer loyalty. By working together, fintech companies and traditional banks create better financial systems, allowing them to meet the ever-evolving technological demands of consumers.
What are round-up apps?
Round-up apps connect with bank and credit card accounts to monitor transactions. Every time a user makes a new purchase, the app rounds up the payment by a set amount (typically the next dollar) and deposits the difference in a savings account or into stocks and shares.
Popular round-up apps include:
- Acorns—This app enables users to build up an investment portfolio by rounding up purchases. Acorns is not free, but it is relatively affordable, starting at just $1 a month for the Lite plan and rising to $5 a month for the Family plan. The app automatically builds a portfolio of stock and bond ETFs for members according to their pre-selected risk tolerance level. In addition to using the round-up feature, users can make a one-time contribution or increase their savings rate to boost their investment portfolio.
- Qapital—Users can create round-up and other savings rules to meet multiple savings goals. The app is compatible with most US banks and popular payment methods. In addition to round-ups, users can make recurring transfers, single transfers, or invest a proportion of income.
- Chime—This app incorporates a microsavings option in addition to its saving and spending accounts, all free of charge. Chime is a mobile banking app that enables users to have a percentage of their paycheck automatically deposited into their account. Since Chime is a bank, the app provides instant access for users who need to dip into their savings in a hurry.
What are the advantages of round-up apps?
Round-up apps are great for younger savers with limited funds, as they can invest modest amounts steadily over time, incrementally building their wealth. It’s no secret that many Americans are failing to make adequate financial provisions for their future, with 51 percent of respondents in one Bankrate poll admitting that they have less than three months’ worth of emergency savings and 25 percent admitting that they have no emergency savings at all.
Unlike earlier generations, millennials show increasing reticence about investing in the stock market. Forty percent of participants in one poll report that they have insufficient funds to start a portfolio—and assume it takes a lot of money to do so.
Finance experts and fintech startups have gone to great lengths to demystify investment opportunities, providing the public with simple, convenient, low-cost platforms through which to start building a nest egg.
What are the disadvantages of round-up apps?
Round-up apps are not the right savings platform for everyone. Individuals with a very low checking balance and those who live paycheck to paycheck could find themselves unintentionally running out of money. For users who are more financially secure, however, round-up apps can be a great way to invest more, save more, and repay debt on autopilot.