The next-gen apps simplifying savings

Any­one who has down­loaded and used a sav­ings app on their smart­phone will appre­ci­ate the ease and con­ve­nience of being able to keep tabs on their mon­ey in real time.

With the advent of a new gen­er­a­tion of ever­more sophis­ti­cat­ed mobile mon­ey apps, you can set sav­ings goals, check how you are spend­ing mon­ey, allo­cate mon­ey to dif­fer­ent accounts and mon­i­tor your sav­ings account.

“Sav­ings apps have made invest­ing con­ve­nient, avail­able any time, engag­ing using gam­i­fi­ca­tion and seam­less through round-up tech­nol­o­gy: buy a cof­fee for £2.40 and 60p goes into an invest­ment account,” says Joe Parkin, head of iShares and UK dig­i­tal wealth at Black­Rock.

The new age of per­son­al finance apps

One of the best-known apps in the per­son­al finance app space is Mon­zo, which has devel­oped from being a pre-paid deb­it card to a mobile bank account.

Oth­ers, such as Mon­ey­hub and Mon­ey Dash­board, enable you to see all your accounts in one place, includ­ing cur­rent accounts, sav­ings and cred­it cards.

With the devel­op­ment of arti­fi­cial intel­li­gence (AI), some apps now have built-in func­tion­al­i­ty which can per­son­alise sav­ings advice and nudge you into mak­ing behav­iour­al changes or switch­ing to more com­pet­i­tive deals. For exam­ple, apps such as Chip and Plum use AI to analyse spend­ing and can reduce bills. Open­Money gives per­son­al finan­cial advice to help you save for the future and man­age your mon­ey bet­ter.

As a result of the gig econ­o­my, many peo­ple have irreg­u­lar income. These apps, which sweep spare mon­ey into vir­tu­al sav­ings pots, pro­vide greater flex­i­bil­i­ty than tra­di­tion­al sav­ings accounts which weren’t designed for our mod­ern work­ing life.

Adapt­ing to our new world of work

“The way we live is chang­ing fast and it’s essen­tial that the finan­cial sec­tor catch­es up,” says Vic­tor Trok­oudes, chief exec­u­tive and co-founder of Plum. “Sav­ings apps are the solu­tion to the prob­lems caused by mod­ern sav­ing pat­terns. Many peo­ple have fluc­tu­at­ing incomes and less pre­dictable and more hec­tic lives.”

One big appeal for mil­len­ni­als using these apps is the abil­i­ty to allo­cate mon­ey to spe­cif­ic life goals.

“Mil­len­ni­als want to see specif­i­cal­ly what their sav­ings are going towards rather than arbi­trary sav­ings accounts,” says Alex Lath­an, chief exec­u­tive of Chip. This helps encour­age small acts of sav­ing which wouldn’t have been prac­ti­cal with tra­di­tion­al deposit accounts.

Sav­ings apps are the solu­tion to the prob­lems caused by mod­ern sav­ing pat­terns. Many peo­ple have fluc­tu­at­ing incomes and less pre­dictable and more hec­tic lives

Chang­ing sav­ings behav­iour

Peo­ple aren’t nec­es­sar­i­ly always look­ing for a quick fix to their finances or expect­ing to solve their long-term sav­ing dilem­mas at the click of a but­ton, says Saman­tha Seaton, chief exec­u­tive of Mon­ey­hub. But sav­ings apps can reduce debt if peo­ple feel they are more in con­trol of their mon­ey. Mes­sages or “nudges” can remind the user in real time to put mon­ey aside.

“For exam­ple, a micro-sav­ing nudge can be gen­er­at­ed if util­i­ty bills are low­er than nor­mal or if you can­cel a month­ly sub­scrip­tion,” she says.

While pre­vi­ous­ly the world of invest­ing was inac­ces­si­ble for many, these apps have democ­ra­tised it, mak­ing it viable to invest rel­a­tive­ly small amounts of mon­ey. Some providers, includ­ing Open­Money, allow peo­ple to invest from as lit­tle as £1, open­ing the oppor­tu­ni­ty to invest to almost any­one and every­one.

The appeal of these apps is they make sav­ing for a rainy-day fund sim­pler and more acces­si­ble, and in turn that can reduce finan­cial stress.

“It’s huge­ly impor­tant to under­stand the pos­i­tive impact a sav­ings mind­set can have on mod­ern-day stress­es,” says Col­in Dyer, head of client propo­si­tion at 1825, the finan­cial plan­ning arm of Stan­dard Life. “If peo­ple can build up three, four or even five months of income, enough to cov­er essen­tial bills and expen­di­ture, it can reduce their mon­ey wor­ries sig­nif­i­cant­ly.”

Turn­ing sav­ings into invest­ment

One key ques­tion is whether this new gen­er­a­tion of smart­phone savers can be encour­aged to con­vert their cash into a pen­sion, ISA or stock-mar­ket fund.

Many of the apps in the UK are cur­rent­ly focused on cash prod­ucts, says Mr Parkin of Black­Rock, but Mon­ey­box in the UK and Acorns in Amer­i­ca are good exam­ples of busi­ness­es that are turn­ing savers into investors.

“Sav­ings apps with the abil­i­ty to invest mon­ey by the pence and pound, can make invest­ing acces­si­ble and afford­able to a much wider audi­ence,” he says.

Anjali Sarin, head of UK at hybrid dig­i­tal wealth man­ag­er Mon­ey­farm, says intro­duc­tion of dig­i­tal finan­cial solu­tions has rev­o­lu­tionised mon­ey man­age­ment for retail investors, whether peo­ple need help bud­get­ing or want to access fair­ly priced wealth man­age­ment ser­vices. Now 60 per cent of users man­age their pen­sion or ISA via an app.

“Sav­ing and invest­ment are still dis­tinct offer­ings, and the arrival of new play­ers and dig­i­tal solu­tions hasn’t sig­nif­i­cant­ly changed this,” says Bill Pack­man, head of asset and wealth man­age­ment con­sult­ing at KPMG UK. “For the invest­ment sec­tor, how­ev­er, it may take a gen­er­a­tion or more to see uni­ver­sal adop­tion of tech plat­forms oper­at­ing along­side the tra­di­tion­al advis­er com­mu­ni­ty.”