Appy way to save you won’t even notice
Getting into the saving habit nowadays needn’t involve going into a bank – modern methods are here
THAT’S AN APP
An explosion of online and app-based services have popped up in recent years to make the process of saving a bit easier for the digital-savvy
QI’m trying to encourage our 21-year-old student son to begin to save. He works casually, and I have suggested that if he was prepared to save £20 per month we’d match that sum. I’ve seen lifetime Isas as an option, but are there other alternatives?
AYour approach is a great way to get your son into a savings habit. And fortunately, an explosion of online and appbased services have popped up in recent years to make the process of saving a bit easier for the digital-savvy, enabling themtoputmoneyawaybased on their spending patterns or even without thinking about it.
The simplest form of this is via a ‘round-up’ feature. Every time your son uses his debit card, his bank will round up his spending and deposit it into a separate account, helping him to build up a pot without actively having to move any money.
App-based banks Monzo and Revolut offer this feature, but don’t pay any interest on the pots into which this spare change is deposited. Monzo does, however, offer a range of savings accounts and Isas, with a minimum deposit of £10, paying as much as 1.15 per cent – not the best rate on the market, but certainly better than average.
Some high-street banks have a round-up feature too – Lloyds Bank, Halifax and TSB all allow you to save your change into a range of easy access savings accounts. Lloyds pays between 0.2 per cent and 0.6 per cent, Halifax pays 0.2 per cent and TSB pays up to 0.45 per cent. HSBC used to offer a savings round-up via its Connected Money app, and it is currently in the process of merging this into its main banking app.
There are slightly whizzier options. Tandem, another digital-only challenger bank, offers a savings account paying 0.5 per cent with not only a round-up feature, but also the ability to save based on your spending behaviour.
Called ‘Safe to Save’ feature, it is an algorithm that calculates how much you can afford to save based on your income and outgoings. You can also select a percentage of your income that you want to save, between 5 per cent and 15 per cent. Tandem doesn’t offer a current account, though – instead, you link your bank account or credit card with your Tandem account and effectively give it permission to read your transaction history so that it can make savings recommendations. It covers most of the big banks and building societies. There are other ‘chatbots’ – a type of artificial intelligence – that have been designed to get people saving. Chip is an app that analyses your spending behaviour (you need to give it permission to access your banking data) and automatically transfers out savings based on what it thinks you can afford. You start earning interest by inviting friends to use the account – 1 per cent for each referral to a maximum of 5 per cent.
Plum offers a similar service, and is available via a smartphone app and also through Facebook Messenger. You have the option to invest the savings that its algorithm has put aside in a peer-to-peer lender (which sees you lending money to people or companies who want to borrow) or in the actual stock market. This adds a different dimension.
Another app, Moneybox, links your current account or credit card and rounds-up your spending, with your savings being invested in the markets. You can invest through a stocks and shares Isa, lifetime Isa or general account, and have the option of three investment styles: cautious, balanced or adventurous.
This will put your son’s money at risk of losses – and investments should be approached with a five-year time horizon, so you need to consider whether or not it’s appropriate for his needs.
Of course, there is nothing simpler than selecting a traditional savings account and setting up a standing order to pay a fixed amount into it each month, perhaps when he gets paid. Regular savings accounts offer some kind of structure – they pay better than average rates, which will tumble if you make withdrawals, giving you an incentive to keep saving to maximise your interest.
Notice accounts could be another option. These require you to tell your savings provider every time you want to make a withdrawal, and you have to wait for a set period before the money comes out – anywhere between 30 and 90 days. They can be a useful brake on the urge to make a withdrawal from the nest-egg you and your son have built up.