Digital Banking apps - clever budgeting & saving tools!
On the Money Course, we talk about the Piggy Banking method as a way of managing our money day to day by using bank accounts to form separate ‘Piggy Banks’ for different purposes. An alternative to opening additional bank accounts could be to use the features of your existing bank account, if they offer a ‘pot’ system, or to open one account with a different bank that has this feature.
Digital ‘challenger banks’ are an interesting option to consider in this context – these are smaller retail banks set up relatively recently, pitched as competition with the larger ad longer-established banks, and with all of their services provided via an app (and online in some cases), rather than via a high street presence. These new banks use ‘fintech’ (financial technology) extensively to make the user experience as intuitive and helpful as possible.
Here is a selection of some of the most popular digital banks and their features - please note that we do not endorse any particular bank or product, and encourage everyone to do their own research into the features of any account or banking provider under consideration.
Monzo offers personalised savings pots which you can name and even attach an image to, enabling you to visualise what you are saving up for and encourage you whenever you look at the app.
You can set up an automatic income-sorting function which moves money into the designated pots as soon as you are paid, and you can also move out savings to partner banks for better interest rates.
Monzo also offers a way of helping you ‘save by stealth’, rounding up the amount you spend and adding it to your savings – for example, a spend of £3.75 with a Monzo debit card would get rounded up to £4 and the extra 25p added automatically to your savings pot, if you had enabled this feature.
They also provide instant notifications of spending, and automatically sort transactions into categories so you can see at a glance what type of item the majority of your money is going on.
And Monzo will let you know if a Direct Debit or standing order’s going to be more or less expensive than last time, the day before the money’s due to come out.
Starling’s Spending Insights provide colourful spending graphics, automatically categorised into sections such as entertainment or travel, so you can see at a glance where you are spending your money
‘Spaces’ is Starling’s answer to savings pots – you can set savings goals and put aside money virtually. You can also see progress towards that goal when you use the app.
The rounding-up function is also available in the Starling app (you need to turn it on), as is the option to be alerted in real time as soon as you pay out money or receive it into your account.
Another bank operating purely digitally, Chase allows you to create up to 20 separate accounts - useful if you have a complex set of circumstances that you need to set up Piggy Banking for!
You can view a summary of your spending with one click, and also block spending on certain items, for example gambling, if you have pre-set this function.
Chase also offers the ‘Round up’ feature, with the difference in the price of an item and the next pound being automatically sent to a savings account with a decent rate of interest, to allow you to save almost without realising.
Whilst Metro is also a high street bank, it has several features that likens it more closely to the digital challenger banks.
These include an ‘Insights’ feature on their app, which allows you select the ‘insights’ into your spending patterns and habits that are the most helpful for you, and a ‘spending summary’, showing the totals of what’s come in and gone out under different categories, and highlighting a list of your largest recent transactions. You can also give consent to receive a real-time alert whwnever your card is used to spend money.
Access an interactive demo of these features at https://www.metrobankonline.co.uk/ways-to-bank/products/mobile-banking/
This is another digital challenger bank, but it should be noted here that money held in its current accounts is not protected by the FSCS (see below for what this means) - you can read Revolut’s explanation of how they keep your money safe here: https://blog.revolut.com/how-we-keep-your-money-safe/
Revolut offers ‘Pockets’, which can be used as ‘virtual Piggy Banks’ for bills, savings and day-to-day spending - automatic transfers can be set up from one Pocket to another to enable, for example, bill payments to be met with a dedicated pot of money that has been put aside for that purpose.
As previously mentioned, traditional high-street banks are constantly developing new tools to help manage our spending, in an attempt with the challenger banks and their powerful apps, as we have detailed above. Features include the list below - not all are avaiable from all banks (check out the detail here, kindly provided by Money Saving Expert), and some need to be enabled in the bank’s app to work.
Automatic notification of spending (amount & location)
Open banking (the ability to connect accounts at other banks to be seen in conjunction with your main accont)
Managing subscriptions by displaying any active ones in a list
Rounding up savings (usually to the nearest pound)
Depositing cheques (by photographing them within the app)
Spending categorisation
Setting of savings goals
The ability to freeze your card, turn off certain types of spending or set a 24 hour spending limit
Notes to bear in mind when thinking about the above:
It’s important to remember that any bank you choose for a new account should be covered by the Financial Services Compensation Scheme. This means that if the bank goes bust, you are covered for up to £85k.
If you do choose to switch to a new current account (digital bank or otherwise), the Current Account Switch Guarantee makes it easy to do as the change-over is taken care of for you, and is guaranteed to happen within 7 days.