What I learned from savings automation and account aggregation.
Savings automation is not a new thing, it’s in the top five tips from every financial planner but it’s really only recently that digital tools have made it personal. And I’m not talking the goal option that pops up in online banking. I am talking customised automation that works with all your bank accounts and your real-time spending habits.
I am a little biased because I work at Navag8 and it was part of my job to sign up. But it’s also fascinating when a digital tool sticks and why. I worked in financial services marketing for several years, where every CEO or Marketing Manager thought that telling people to sacrifice that movie ticket or take away coffee would somehow inspire action. But it doesn’t.
Telling customers to sacrifice the small luxuries that makes their life enjoyable just makes them feel crappy about their financial situation. This is one reason the Barefoot Investor is so popular. Scott Pape doesn’t tell you that you can’t buy luxuries, he just automates the savings buckets so you have a budget for them. It talks to the simplicity we need whilst acknowledging human nature. And it’s not judgey.
As humans, we are not wired to be financially sound. We often make decisions made on emotions and suffer choice paralysis with too many options. So keep it simple and automate it!
Round ups helped me save more, but also spend less.
I tap-and-go. A LOT. The Round-Up feature allows you to ‘round up’ every transaction by a percentage. I first set it to 10% and the Top Ups at $50 per week. At the end of the week, the Round-Ups are tallied, withdrawn and placed into a savings account away from your other money. I had just gone through a business rebrand and spent a ton of money so the first two weekly withdrawls to the Goal Focused Savings accounts gave me a heart attack.
User insights: The average Round-Up is 6% or $1.64 per transaction
My spending habits made me more financially aware.
My first instinct was to lower the Round-Up amount. But instead, I lowered the Top-Ups and really looked at my transaction history for the first time, in a very long time. I know responsible people are supposed to do this and I kinda sorta take notice but part of me still thinks I can manage it intuitively.
I was a little embarrassed at how frivolous I was with teeny purchases because it showed how spending is also connected to mood. There it was in those darned Round-Ups; how I rewarded myself on a good or bad day. So I consciously changed the number of food or wine shops I did per week, reduced my online impulse purchases by half and corrected a few automated outgoings that were duplicated. So it sounds weird, but ‘spending to save’ as it is, made me appreciate the savings but acknowledge and correct my spending ignorance.
User insights: So turns out I am the norm. The majority of users did the same – lowered their top-ups and raised their round-ups in the first few weeks.
When a goal is within reach, I made the goal bigger.
Like all humans, I wanted to make the pleasure last. I have always known that goals should be personal, measurable and achievable but in all honesty, I kind of just got on with it and there was not too much structure to it. When I first set up the goals, I got carried away with what I could do and set four. But as my awareness grew, I took it a bit more seriously, deleted two, set one for travel and one for investments and raised the target amount for each. I now have FOSA or ‘Fear Of Starting Again’ and don’t want to touch the savings.
User insights: Again, I am the norm. In the first week, the average amount of goals for users is 6.7 but by week 3 it goes down to 4.3.
Personal progress texts give you a boost
Receiving encouragement made me feel validated, even for just a minute, it is like a psychological reminder that you are on track. It’s nice to get messages telling you how far you have come and how close you are to achieving your goal. Health apps do this really well, the financial services not so much. If financial security is the biggest stress in the average person’s life, it would be great if your bank or super fund sent you some personal messages about your current situation, like ‘congrats on paying that extra bit of your home loan this month’, or ‘well done on the additional contributions’ or ‘slow down, you have spend creep’. I took this journey on my own but goals can be shared between family or friends so everyone can contribute. This means a kind of gamification process where you can get notified when everyone puts in.
User insights: Navag8 was originally targeting millennials but the data showed us that 40-55 wanted it for their kids education or family trips.
Account Aggregation is like the mirror you can’t avoid
If you haven’t ever aggregated your accounts, it’s pretty enlightening. I bank with a neobank and a Big 4 because they each serve a purpose. And I am talking 4 or 5 accounts within each bank. One gave me a home loan and made it impossible to delete the extra accounts without a phone call and a branch visit. The other is for easy account management, user experience, flexibility and additional feature set. When managing finances ‘intuitively’, having two very separate spend profiles and accounts means you can kind of cheat yourself. If one account is looking sad, you can just switch to the other one to justify a purchase. It does not work when you aggregate! This is not a new thing but basically you give permission for the app to access multiple transaction records from more than one bank or account. We don’t have access to your actual account, just the transaction feed. This means seeing ALL of your spend in one place and there is nowhere to hide!
User insights: Most single users have two banks connected to the app and 3 accounts.
It’s never too late.
Finance is personal. And just like your voting choices, it’s rarely discussed in public. You might hint at ‘being broke this week’ or say that ‘things are hard’ but there is a stigma in financial hardship or not understanding the industry terms. Even writing this article made me cringe. Do I sound like a privileged working woman who mismanages her finances and now shops to save…
The point of automated savings and goals is to help with personal finance management. No matter what you have coming in our going out, there is the potential to grab a little from the top and put it aside. Bad spending habits are hard to change if you have blinkers on or manage your finances intuitively. Human nature will fight you and the numbers don’t lie, so do what all those financial planners said – automate your savings, examine your spending habits and set achievable goals. And if you can’t do it yourself, there is an app out there to help.
Navag8 is a white label, mobile, goal-focused savings solution for financial service companies. Get in touch for a demo.