Want to become financially healthy? Learn how tech tools can help
Posted: August 11, 2022 | Word Count: 781
Could your finances use a checkup? If so, you’re not alone. According to the Financial Health Network, "Financial Health Pulse: 2021 U.S. Trends Report," nearly two-thirds of Americans struggle with financial health. But what does that mean? The study considered factors such as people’s ability to pay bills, their amount of short-term savings and their credit scores. If you’re not sure how healthy your finances are, here’s one starting point — do you have enough savings to cover at least three months’ worth of expenses in an emergency? If you answered no — or if you’re not even sure what three months of expenses would be — chances are you could benefit from recent tech innovations to help manage your finances smarter.
Here are some ways to improve your financial health using the latest tech tools.
Know your expenses
One of the first things financial advisors will tell you to tackle is budgeting. In the simplest terms, having a budget means you know how much you need for expenses each month (and throughout the year, as some expenses aren’t monthly). Fortunately, tools like Digit (acquired by Oportun) can help you budget effortlessly.
The Digit app calculates smart amounts of money to move from your spending account into a dedicated bills account throughout the month, helping you keep those funds separate for expenses like rent, utilities or subscriptions. Digit also helps you budget by keeping money for spending separate so you won’t overspend cash you’ll need later in the month and avoid that crunch before payday.
Make saving effortless
But, we’re human. And budgeting is difficult to do manually and not most people’s idea of a good time. To stay on track and save for longer-term goals (plus that emergency cushion), some financial advisors might recommend using technology to automate your savings so you don’t even have to think about it.
For example, by using Digit to automate savings, the average member effortlessly sets aside over $3,000 toward their savings goals*. A new study from the Financial Health Network’s Financial Solutions Lab, “Building Consumer Savings with Fintech Innovations,” found that for each month a member kept their checking account connected to Digit, members increased savings by an average of $217. This may suggest that automating savings can make a meaningful impact long term, versus saving on your own.
Save for multiple, specific goals
Another interesting finding from the Financial Health Network study was that people who saved for specific goals set more aside than those who simply saved. So instead of planning to generally "save money," it helps to identify concrete, measurable goals like:
- Paying off a particular debt
- Building an emergency fund or retirement fund
- Making a big purchase
- Saving for vacation
In the study, Digit members with multiple savings goals also saved an average of $114 more over a period of five months than those with only one goal. In fact, each additional savings goal their members set can be tied to a nearly $80 increase in savings over five months. This indicates that having specific and intentional goals for money — as opposed to one generic savings goal — increases the motivation to save.
“Consumers are feeling the impact of inflation, which is why now more than ever it is important to find ways to set aside more money and have the peace of mind that comes with it,” said Snigdha Kumar, head of Product Operations for Digit. “Evaluating your personal finances and planning can feel overwhelming, but technology can be your partner and help you achieve your financial goals without having to think about it.”
Plan for the long term
When you’re ready to consider longer-term goals, Digit also makes investing as easy as possible by helping you contribute to your portfolio for long-term wealth and retirement at your own pace. The tool knows about your expenses and goals, smartly splitting up your deposits for bills, savings and long-term investments.
The upshot of using smart digital financial tools? The research is clear: Automating your savings plan with clear motivations for the money you're saving makes it easier to achieve your personal financial goals. Using the right technology tools can help make your financial life easier and help you be more financially secure today and in the long run.
Interested? Sign up as a new member to try the app for six months free and see the impact for yourself. Visit Digit.co to learn more.
*Based on average saves of all paying Digit members in the prior 12 months.
Data analysis included various regression analyses on Digit users with available data who joined after January 2020. For more information, read the full report here.