This week I learned a lot about passive saving.
Passive saving is “an alternative to being frugal,” writes Modest Money. Or, a “saving and earning [opportunity] which you can set in motion, but which continues on [its] own without your effort.” Confusing? Modest Money suggests an example of passive saving would be to “change where you shop” or “owning a rental agency” — the idea being you do something once and money just… kind of appears?
But if the concept of passive saving (free money? maybe?) seems cool to you, but you really like the Whole Foods near your apartment, there’s another way. An app called Digit has taken up the term, describing its practice of passive saving in a more practical manner: “Every few days, Digit checks your spending patterns and moves a few dollars from your checking account to your Digit account, if you can afford it.”
Is Digit paying you? No.
Is Digit investing anything for you? No.
So what is Digit doing?
Digit, essentially, is creating a savings account for you. Which is great if you don’t already have one. But even if you do, it’s claiming it knows better than you on how exactly to save money: “Digit automatically figures out when and how much is safe to save based on your lifestyle. Digit doesn’t require you to figure out an arbitrary amount to transfer every month.” My lifestyle, eh? Digit is claiming that by watching my spending patterns, they know how to better save me some of my own money.
Which is not totally crazy if you think about it. Like many people, if I have money in my bank account, I will try to spend it. By keeping this Digit-themed savings money out of my bank account, I can’t actually spend it (unless, of course, I choose to have it transferred back into my account, which Digit does for free and at any time).
But Digit is not your bank, so this bit is important: “All funds held within Digit are FDIC insured up to a balance of $250,000.” Meaning this isn’t some ploy to steal your money. For now, this venture capital-funded app is free to use as you please and as a place to “store” bits and pieces of your earnings in a makeshift, passively earned savings account.
People seem to really like it. I only got started a week ago and have already saved $64. A friend of mine recently posted on Facebook that she had saved $3,000 in 7 months — this, of course, is based off her earnings and what she can afford to save. It’s different for everyone! But what’s great about Digit is that it proves that everyone has the ability to save money and everyone should be doing so.
Sign up for Digit here.