Smart money-saving apps: How do they work and do you need them?

They say a penny saved is a penny earned, but how do you start saving the pennies? A new wave of smart savings apps could unlock the value of your digital small change.

It’s hard to save for a bountiful Christmas when tap-and-go payments mean you don’t end up with a pocket of small change at the end of the day - but a new breed of smart savings apps might be the answer.

Apps like Chip and Revolut watch your spending to work out how much you can save, then put it in a digital piggy-bank. You can even earn interest or invest your savings. Can smart bank accounts and savings apps help you build a savings habit and keep your money safe? We investigate.

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Chip banking app lifestyle

How do smart money-saving apps work?

All of these apps connect to your current account (or accounts) and watch your online and card spending. Some of them also come with a current account.

Each one analyses your spending and balance, but while some just make automatic savings, others use AI to calculate how much you can save and how much you need to keep a healthy bank balance.

Automatic savings calculators apps

Chip, Cleo and Plum will work out how much you can afford to save every few days, and put this into your savings account if you approve it.

They look at regular bills as well as your spending patterns, so they can warn you if you’re going to be overdrawn and suggest ways to cut back.

Starling Bank’s app will help you to budget and understand your spending, but you have to make your savings manually.

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Digital small change savers apps

Moneybox, Monzo and Revolut look at all your spending, then they round each payment up to the nearest Pound and put the difference in a savings account. You access and control your accounts through an app on your phone.

Other options include saving a pound if you spend a whole pound, and ‘accelerators’ which double or quadruple your savings if you can afford to save faster.

You can also ask them to save a specific amount every week or make a saving every monthly payday. Additional one-off payments can boost your savings if you have extra cash you want to avoid spending.

Revolut smart banking app on Apple watch

What’s better: smartphone app or Facebook Messenger chatbot?

Most of these services are managed a smartphone app where you see your spending habits and control your savings.

Cleo and Plum use a Facebook Messenger ‘chatbot’ which sends you messages, and you ask it questions or give it instructions as though you’re talking to a real person.

Some people enjoy the conversational style of a chatbot interface, but others prefer to be in control with an app's buttons and graphs. Either way, it's a new kind of banking experience.

My smart savings experience: Eva Vano-Segui

Eva started using Revolut because the pre-paid debit card has low charges and a very good interest rate. When she’s not on holiday, Eva also uses a Vault in her account to save for her next trip.

“I started using the Vault in July and since then I have saved almost £300.” said the 31-year-old designer. “You don’t really notice that you are saving. It’s just the little bit extra that you do not notice anyway, like when you pay 99p for something.

“I do not think I would use it for a high amount of money because it’s not a savings account but it’s very handy for things like this.

“Every time I go out of the app when I’m using my phone I would have to enter my PIN or use my fingerprint, so I think it’s pretty secure.”

Monzo smart banking app and card lifestyle

How much can you save in smart savings apps?

There’s no limit on how much you can put into the basic savings accounts offered by Cleo and Plum, or the Moneybox General Investment Account.

Chip allows you to make up to six manual saves of £100 every month, with an account limit of £10,000 - you should probably look for an ISA if you’ve hit this level of savings.

Stocks & Shares ISAs have investment limits of £20,000 each in the 2018/19 tax year. Lifetime ISAs are limited to £4,000 per year. The Junior Stocks & Shares ISA is capped at £4,260 this year.

You can’t invest more than £20,000 a week in the Moneybox General Investment Account, but if you have £20,000 a week you should probably get professional advice on your investments.

Is my money safe in a smart savings account?

The two things to look out for are regulation by the Financial Conduct Authority (FCA) and protection via the Financial Services Compensation Scheme (FSCS).

The FCA makes sure that companies acting in the UK market meet standards and have the necessary qualifications and experience.

The FSCS guarantees up to £85,000 held in a UK-regulated bank, in case the bank goes out of business.

Starling smart banking app lifestyle

Is my data safe in a smart savings account?

The savings accounts have ‘read-only’ access to your other bank accounts. They can see your spending but they can’t log in and access your money, and the data is stripped of bank account and credit card numbers.

They don’t store your log-in details after setting up the read-only access, and you pay into them via the same Direct Debit system you use for other bills.

All of these companies claim to use ‘bank-level’ encryption and cryptography. They are all registered with the Information Commissioner’s Office, under the Data Protection Act.

The Chip and Moneybox apps are PIN-locked. The apps for Monzo, Revolut and Starling also have ‘biometric’ locks (using fingerprint and/or facial identification).

Cleo and Plum use Messenger. You would have to change your passwords and delete all their chats if your Facebook account was hacked or your phone lost.

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What if I need my money in a hurry?

The savings accounts are designed for quick access, and most will pay out within a day if you request your funds before a fixed deadline (for example, by 2pm with Chip).

Although you have a debit card with Monzo, Revolut and Starling, you would need to move the money out of your Pot or Vault to be able to spend it. This can be done instantly in their apps.

What automatic money-saving apps are there?

If you are considering one of these apps, takes some time to find out more how they work and the features they offer, to ensure you find the right app for your needs.

Watching your budget and starting to save: Chip

Chip smart banking app

  • Apps: Google, iOS
  • Licensed and protected? FCA license applied for, FSCS through partner
  • Type of account: Basic savings
  • How does it work: App
  • Interest rate: 1% per person introduced to Chip, max 5% (expires after 1 year)
  • Banking partner: Barclays

Better budgeting and short-term savings: Cleo

Cleo smart banking screen

  • Links: Sign up
  • Licensed and protected? Not licensed. Pledge to match FSCS protection
  • Type of saving: Basic savings
  • How does it work: Facebook Messenger chatbot
  • Interest rate: None
  • Banking partner: MangoPay

Starting a long-term savings habit: Moneybox

Moneybox smart banking app

  • Apps: Google, iOS
  • Licensed and protected? FCA-licensed, FSCS protected
  • Type of saving: Stocks & Shares ISA, Lifetime ISA, Junior Stocks & Shares ISA or basic savings
  • How does it work: App
  • Interest rate: Varies with account type and investment strategy
  • Banking partner: none

A smart current account with basic savings: Monzo

Monzo smart banking app

  • Apps: Google, iOS
  • Licensed and protected? FCA-licensed, FSCS protected
  • Type of saving: Ring-fenced in current account
  • How does it work: App
  • Interest rate: None
  • Banking partner: none

Budget management and investments: Plum

Plum smart banking app

  • Apps: Sign up
  • Licensed and protected? FCA license applied for, FSCS through partner
  • Type of saving: Basic savings, Stocks & Shares ISA
  • How does it work: Facebook Messenger chatbot
  • Interest rate: Nothing on basic savings, ISA varies with investment strategy
  • Banking partner: MangoPay

Short-term savings and a pre-paid travel card: Revolut

Revolut smart banking app

  • Apps: Google, iOS
  • Licensed and protected? FCA-licensed, FSCS through partner
  • Type of saving: Ring-fenced in current account
  • How does it work: App
  • Interest rate: None
  • Banking partner: Lloyds and Barclays

Current account with savings targets: Starling Bank

Starling smart banking app

  • Apps: Google, iOS
  • Licensed and protected? FCA-licensed, FSCS protected
  • Type of saving: Ring-fenced in current account
  • How does it work: App
  • Interest rate: 0.5% AER on balances up to £2,000, 0.25% on balances from £2,000 up to £85,000
  • Banking partner: None

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