digitWhether it’s for an emergency fund, an upcoming vacation, an investment or to pay off debt, everyone has a reason for trying to save, but saving money is sometimes easier said than done. Fortunately, in the Digital Age, there’s an app for that — literally. Automated savings apps, like Digit and Qapital, are designed to help you save money by transferring set dollar amounts into an in-app account and holding the money there until you need it. But how exactly do these apps work, and should you trust them with your financial information? We’ve talked about the security of money-sending apps like Snapchat’s Snapcash and Venmo before, but now we’re diving into money-saving apps. Keep reading to learn more about how automated savings apps work, whether you should trust them and if these apps are the best way to save money.

What are automated savings apps?

Automated savings apps are intended to help you save money without thinking about it. These apps automatically transfer small amounts of money from your checking account (at any bank or financial institution) into an in-app savings account, where it sits until you request to transfer it back into your checking account. The purpose of these apps is to keep the transferred money in an account to prevent you from spending it, thus helping you save for a particular goal. Although there are several apps out there that offer different settings and features — such as Digit, Dobot and Qapital — they all essentially work the same way.

How do these apps work?

No matter which automated savings app you choose to use, you must first give the app access to your checking account either by providing your online banking login credentials or inputting your bank’s routing number and your account number. Then, depending on which app you use, it will either determine how much money to withdraw by monitoring your financial habits, or let you set a specific dollar amount and frequency at which to withdraw and transfer funds. Digit, for example, will monitor both your income and spending habits to determine how much you can afford to withdraw from your banking account and transfer into your Digit account. It’s supposed to be small amounts (e.g., $5 to $50) that you wouldn’t notice missing. Dobot is another automated savings app that’s similar to Digit, except you have the option to set a dollar amount as your savings goal and the deadline for when you’d like to reach that goal. Then the app will determine the ideal amount you need to save to meet your goal and transfer that amount every week. Qapital, another automated savings app, gives users more control over their money by allowing you to choose how much and how often to withdraw and transfer funds. As you can see, these apps all have similar goals (to help you save money), but they all function a little differently. Regardless of the app you choose, when you think you’ve saved enough or you’re ready to get your money back, you ask the app to transfer your money back into your checking account, which takes a few days to complete.

Should I trust automated savings apps?

Although Digit, Dobot and Qapital all claim to use SSL encryption or some other high-level encryption and your funds are all FDIC insured in these in-app accounts, you’re still required to give these apps your personal banking information, which is something that might make some people hesitant — understandably so, as even seemingly unhackable companies have experienced major data breaches in recent years. We’ve talked about the dangers of identity theft time and time again, and it’s become more apparent that nobody is safe from identity thieves in the Digital Age. So while your funds are FDIC insured with these apps, this doesn’t protect you from hackers in the event of a major data leak, which is especially worrisome considering you’re giving these apps your sensitive financial information. Be aware that your bank account is not something that you can easily change if it’s leaked, unlike a credit or debit card.

What are the other downsides to these apps?

The security aspect of these automated savings apps is one thing to consider, but accessibility is another. With a traditional savings account, you can transfer the funds from your savings account to your checking account almost immediately, and you also have the option to withdraw the funds in person — giving you access to them as soon as you need them. On the other hand, transfers from automated savings apps take a few days to deposit into your checking account, so you’re stuck waiting on that money. It’s important to note that your money will not gain any interest while in these in-app savings accounts either — it just sits there, so these apps aren’t the best way to try to grow your money while you save it.

What are my other options for saving money?

Those who are unsure about signing up for an automated savings app have a couple of other options, including:

Automatic savings plans

An automatic savings plan, sometimes referred to as an automatic savings program, can be set up with most major banks, including online banks. Like automated savings apps, these types of savings plans automatically transfer money into your savings account every day, every week or every month; the dollar amount that is transferred can be determined by you, the bank or your spending habits, depending on your bank’s features. If you have a checking account with Wells Fargo, for example, you could set your an automatic saving plan to transfer $1 from your checking account to your savings account every time you swipe your debit card for purchases. Another automatic savings program option, like the one Bank of America offers, rounds up your purchases to the nearest dollar and transfers the difference into your savings account — for example, if you may a purchase for $2.50, the bank will round it up to $3 and transfer $0.50 into your savings. Any money transferred with an automatic savings plan will earn interest based on the APY rate associated with your particular savings account.

If your bank doesn’t offer features like the ones noted in the previous paragraph, you can create your own automatic savings plan. The first option is breaking up where your paycheck’s direct deposit goes — for example, you can set it so 90% of your paycheck in your checking account and the other 10% goes into your savings account. If your work doesn’t provide direct deposit, you can make sure you split up the check when you deposit it into your bank account. Another option is to set up a reoccurring transfer from your checking account to your savings account — this is a feature most major banks offer. You should be able to not only determine the amount you wish to automatically transfer, but also how often the transfer will occur. While these options are ones that may help you save, depending on your ability to budget, you should know that Federal Regulation D limits the number of transfers and withdrawals from savings accounts to six per month. This means you should be sure to plan accordingly if you need to access any of the funds in your savings account and you’re either at the limit, or near it.

Online savings accounts

Online savings accounts are another alternative to automated savings apps if you’re looking for a way to store, save and grow your money. These types of savings accounts have a few benefits over traditional savings accounts, as well. That’s because online savings accounts tend to offer more competitive APY rates than the traditional savings accounts offered at brick-and-mortar banks, which means a higher return on your money. Online savings accounts are also more convenient for those who prefer to do their banking online without going into a physical branch or dealing with an in-person teller at a bank. And since most online banks allow you to withdraw your money from ATMs or complete an electronic funds transfer, you will be able to access your funds immediately, as is the case with an ATM withdrawal, or within a couple business days, as is the case with the electronic funds transfer. Keep in mind that a number of online banks offer both checking and savings accounts, so it may be something you want to consider for all of your banking needs. If you’re worried about whether your money is safe with an online savings account, you can visit our guide to the safety of online banks to learn all about how to evaluate the safety of an online bank.

Want more tips on how you can better manage your money and credit? Follow our personal finance blog to get exactly that, and read more about online banks at our online savings account reviews.