In 1955 Intel co-founder Gordon Moore made an observation that has since been dubbed “Moore’s Law”. Moore’s Law is easily summed up to say the computing speed of technology will double every 18 months. While this amazing feat has been true for the last 60 years, some speculate we could see this trend die in 2017. As how much faster we can make our processors comes into question, many people have deemed the future of the technology sector to be, not hardware, but software based. The digital revolution has taken us to a place where software is integrated into our daily lives; from our phone alarms in the morning, to dodging traffic on our daily commutes, scheduling our work days, and winding down with a streamed show we get home. New software capabilities are allowing us to seamlessly integrate these functions into our routines.
Now some are even letting new software decide their savings habits for them along with their route to work. Ethan Bloch CEO and founder of Digit, created an automated system that monitors your checking account and automatically moves an inconsequential amount to a savings account. Digit uses an algorithm that looks at the low, high and average checking account balance, when you are paid and compares it to your upcoming bills and recent spending. Then it uses that information to come up with an amount (usually between $5-$50) that you shouldn’t miss and moves it to a savings account every 2-3 days.
Going forward Bloch is looking to make Digit “the first artificial intelligence powered financial goal program”. Users would set a desired date and total and Digit would make projections to figure out the optimal amount needed to start saving to achieve the goal, or if it’s even feasible. Where Digit falls a little short is that it cannot pay interest like a standard savings account since it isn’t a bank. Digit can be a great behavior modification tool to help get people saving, but expecting to used Digit for something beyond saving for vacation, a new gadget or a down payment on a car is probably out of its wheelhouse.
In the grand scheme of things Digit is a niche product mainly used to save small or moderate sums for dedicated purposes. It can be a tool used to “painlessly” save for a specific purpose like a vacation, but relying on inconsequential amounts of money to meet mid or long term financial goals is far from a good idea. And frankly the idea of an algorithm tracking my spending gives the heebie-jeebies.
As always, please remember to check out the December market update on our website: http://laurelfinancialgroup.com/market-update