A new breed of smartphone apps could help you build a savings habit without even trying.
Some work by automatically rounding up any payments to the nearest pound and stashing away the difference. Others analyse your spending habits and suggest how much you can afford to save.
With Britons saving less than ever, experts say the apps are an easy way to get started and urge parents to encourage children to sign up.
Savvy saver: A new breed of smartphone apps could help you build a savings habit without even trying
But you should avoid leaving cash languishing in these accounts for too long — they’re unlikely to offer the best interest rates.
Here, Money Mail explains how the apps work — and the catches to watch out for…
Since launching in 2014, Tandem has amassed more than 500,000 customers. It was the first savings provider to insist that you manage your account via a mobile phone.
How does it work? First, download the Tandem app on to your mobile phone and link it to your current account using Open Banking — a system that allows banks and third parties to share your financial information securely.
To do this, you need to enter your online banking details. Then, every time you use your debit card, your spending will be rounded up to the nearest pound.
The extra will be moved into a flexible savings account paying 0.5 per cent interest once a week. You will be notified first to give you a chance to change your mind. You can withdraw funds at any time.
Tandem’s Safe to Save feature monitors your spending and calculates how much extra you can afford to put away each month. The maximum it will recommend is 15 per cent of your income.
Is it safe? Up to £85,000 of your money is covered by the Financial Services Compensation Scheme (FSCS).
Monzo Bank began offering app-only current accounts in late 2017 and now has more than one million customers. It launched its savings tool Coin Jar in March 2018.
How does it work? To sign up, download the Monzo app and open a current account. Then create a ‘pot’ and select the option to round up transactions automatically.
Use an app to put your change from a cup of coffee into a nest egg
You can set up multiple pots for different goals — for example to save for a holiday or house deposit.
Any payments over £1 will be rounded up to the nearest pound and the extra will go into your chosen pot.
You can also reward yourself for good spending behaviour or set up a penalty pot. You could agree to tax yourself £5 automatically every time you order a takeaway. You can access cash at any time.
Is it safe? Yes, up to £85,000 is covered by the FSCS.
Savings app Chip, which launched in 2016, analyses your spending and decides how much you can afford to save. It has more than 100,000 users.
How does it work? Download the Chip app and link your current account using Open Banking. Every two to three days, Chip looks at what purchases you’ve made and compares them to your usual spending patterns.
If you have spent less than expected, the difference will be stashed away. You can also opt to move an additional £100 from your current account to Chip six times a month. You will not earn any interest on what you save.
If you refer people to the app, you will be paid 1 per cent per person for a year, up to a maximum of 5 per cent. Withdrawals can be in your current account the same working day.
Is it safe? Your money is ring-fenced in a Barclays account, where up to £85,000 is protected as usual under FSCS.
London-based savings app Plum launched in 2017 and has around 375,000 customers.
Like Chip, it helps you save by estimating how much you can afford to spare.
How does it work? Visit withplum.com and set up the app using Facebook’s messaging service. You need to enter your email address and bank account information.
With Britons saving less than ever, experts say the apps are an easy way to get started and urge parents to encourage children to sign up
Plum analyses your daily spending habits and transfers small amounts into a savings account around five times a month.
You can choose between six settings: ‘Normal’ is the default, while ‘Beast’ mode, for example, ramps up the amount you save by as much 75 per cent. However, you will not earn any interest.
Withdrawals are paid within 24 hours on business days.
You can also opt to invest your cash. Choose from three risk options: conservative, balanced or growth. You can pick the types of firms you want to invest in, such as ethical or tech companies.
If you need your investment back, it can take up to a week.
Is it safe? As with Chip, up to £85,000 cash and investments is protected in a Barclays account.
Cost: Free if you stick to cash. The investment option is free for the first month and is £1 a month thereafter. There is also a 0.15 per cent fee on the value of your fund investments, charged monthly.
More than 150,000 customers have signed up for London-based Moneybox since it launched in 2016. Instead of storing your money in cash, it invests it.
How does it work? Download the Moneybox app, enter your bank details to link it to your account and open a stocks and shares Isa.
You can choose to make one-off payments or just use the round-up option. There are three investment options to choose from: cautious, balanced and adventurous. It may take two weeks to withdraw any money.
Is it safe? Up to £85,000 of your money is protected under the FSCS investment limit.
Cost: There is no subscription fee for the first three months, after which you pay £1 a month. On top of this there is a monthly 0.45 per cent platform fee and fund fees of between 0.12 per cent and 0.3 per cent.
Lloyds and TSB also offer auto-saving schemes to customers with current and savings accounts, so you don’t have to share your details with a third party.
Switch on Lloyds’ Save the Change feature by logging into your online banking, visiting a branch or calling 0345 300 0000. TSB has a similar scheme which rounds up spare change.
However, big banks rarely pay the best rates. Lloyds’ Easy Saver account, for example, pays 0.2 per cent. TSB’s Easy Saver pays 0.5 per cent.