Millennials are constantly told to spend less and save more.
First they came for our avocados; then they said we didn’t need living rooms. High rents and low wages curtail our ability to save for a housing deposit or a pension. So what can we do to take back control of our money?
Welcome to the world of fintech apps. From budgeting and saving to investing in the stock market, a wave of financial innovation is redefining the ways millennials manage their money by delving deep into our spending data.
The revolution started with mobile banking. It is predicted that 35m people, or 72 per cent of the UK adult population, will be managing their current accounts via their phones by 2023. App-only banks are becoming increasingly sophisticated, adding perks, tools and functionality, but it does not stop there.
Open Banking, which launched in the UK in January, moved things up a gear. With the permission of the account holder, banks can share our financial data, such as transaction history and spending patterns, with other third-party providers regulated by the Financial Conduct Authority (FCA). These include money management apps Moneybox, Emma (the UK version of Mint, the popular US app) and Yolt, which is owned by ING.
Many customers might react with horror at the idea of a stranger peering into their bank account, but the millennial generation is much more open to this technology. So could an app digitally prod us into making savings by managing our money more effectively — or would our low salaries and high living costs prove an insurmountable barrier?
In an attempt to answer this question, four millennial FT staffers in London each picked an app, and conducted a four-week trial with a video diary to see just how much we could save.
Can’t save, won’t save?
We all had different savings goals, but hoped that an app would make identifying opportunities to save as painless as possible.
Alice Hancock, 28, feared she would be renting into her 40s like half of UK millennials and hoped an app linked to a Lifetime Isa could speed up her rate of savings for a property deposit.
Nicholas Megaw, 26, thought that saving for a “big target” such as a property was “laughably far away”, but was eager to see if digital tools could provide a “meaningful addition” to his existing savings.
Apps can also help with budgeting. For Camilla Hodgson, 25, having a single pound left at the end of the month would be a success. And as a 23-year-old recent graduate, I wanted to become more mindful of my finances and adjust to the responsibilities of working life.
Picking the right apps to match our goals proved tricky. The market is oversaturated with options that are more similar than they are different.
Our four choices (below) were designed to help us budget, save, analyse our spending and start investing — but the process is made more exciting by innovative “nudges” that could tempt (or terrify) you into saving more.
Moneybox links to your bank account, and encourages you to “round up” digital transactions to the nearest pound, seamlessly pushing your digital spare change into a stocks and shares Isa. Known as micro investing, the amounts saved are small, though they add up over time.
Some apps, like Emma, use artificial intelligence technology to highlight suspect spending, such as subscriptions for gyms you may never go to or magazines you may never read.
Others, such as Chip and Plum, take this a step further by calculating how much you can afford to save — then moving small amounts of money automatically into a separate savings account.
If that sounds scary, then don’t download Squirrel. This financial management app requires users to have their monthly salary paid into a separate online account. Once the essentials (bills and regular savings) are covered, an acceptable level of weekly spending money is drip-fed back into users’ current accounts.
However much we wanted to boost our savings, none of us were prepared to trial this app for a month. Nobody wants to feel like a naughty child receiving pocket money from their parents — even if 26 per cent of millennials still live with them.
Reckless spending may call for drastic measures, but absolving responsibility for our finances didn’t feel like the answer.
Many apps provide millennials with the tools to analyse and interrogate their spending habits.
I used You Need a Budget (YNAB), a popular US debt management app based on a traditional envelope-style budgeting system, which categorises your current income to help you stop overspending.
App-only banks such as Monzo and Starling offer an array of tools to categorise, chart and monitor your spending month by month. Both apps offer personalised savings goals — could it make it easier to save if you’ve identified specific targets, such as a festival ticket or new sofa?
Bridie Murphy, 22, a teacher from Manchester, said she favours Monzo over traditional banks because it immediately updates her current account if she makes a contactless payment, making it easier accurately to track her bank balance. “Monzo is more user-friendly than my old Santander banking app, and it was so little effort to get it,” she said.
Many apps are much more “in your face” than traditional online bank accounts, sending constant updates on your balance. This solved my biggest problem — shying away from checking by bank balance through fear of how depressing the numbers will be. After the trial, I switched to an app called Yolt which provides a fun interface with simple graphics to help me stay on top of my finances.
Gamification should make tracking your spending more fun, but it can also be very annoying. By the end of the trial, Nicholas hated Chip, and groaned when it sent him cheesy motivational messages with emojis and gifs to congratulate him on making a saving.
Other users may find the data sharing made possible by Open Banking more disturbing. Although providers are licensed by the FCA, few are household names. In the wake of the Cambridge Analytica scandal, can we trust them with our data? The four testers were split on this — two of us signed away our data without a second thought, impressed by the functionality, and two of us were more reticent.
By the end of the trial, it was clear that for all their gimmicks and nudge tactics, many fintech apps were trying to create solutions for problems that do not exist.
On the plus side, we all engaged more with our finances. But we were left wondering if the apps had actually boosted our propensity to save, or if old-fashioned methods were more effective.
Alice saved less by rounding up her spare change than she normally would through the tried-and-tested method of a direct debit to her savings account on payday. After a few weeks of being more mindful of my expenditure, I reluctantly realised that looking at it all the time was not going to make it go up.
And forget about any apps which require the added faff of inputting data, rather than gathering it all automatically. It was clear that we all craved simplicity. With that in mind, maybe renouncing digital banking and reverting to cash budgeting would be a better solution.
Putting apps to the test: Moneybox and Chip
Tester: Alice Hancock, editorial assistant, FT
App tested: Moneybox
Moneybox rounds up purchases on your debit card to the nearest pound and invests the difference. Take my most recent buy: £1.39 spent on biscuits (oh, my glamorous life). This is rounded up to £2 and with a swipe of the app, the 61p difference is invested in my Lifetime Isa.
Unlike the other apps, Moneybox is more about investing than saving. The odd 61p is not going to get me nearer to a savings goal of £4,000 this year in order to claim the government’s maximum Lifetime Isa bonus of £1,000, which I can eventually put towards buying my first flat. As this is a long-term goal, I wanted exposure to the stock market.
As a first-time investor, I found the app’s interface was clear and the squirrel and owl cartoons were (mostly) endearing. You can easily choose what level of risk you would like to take. If you want to be more hands on, you can alter the allocations to each of the funds: cash, property and global shares. The app is free, but like any investment Isa, fund management charges will apply.
Customer service from Moneybox was impressive. During the crunch period of trying to transfer my Help to Buy Isa into the Moneybox Lifetime Isa before the tax year end, I had responses to emails — often with very amateur questions — within half an hour, including over the weekend. The app sends automated messages to explain things like when your Isa bonus is invested and it is easy to see a record of your savings as they are paid in.
Moneybox has made me feel more comfortable about investing. Previously, I had a £200 monthly direct debit to my savings. Using the digital round-up method, I have only saved £47. Going forward, I think I will combine the two. It’s good to know that you are putting away a few more pennies than you realise.
Nicholas Megaw, retail banking correspondent, FT
App tested: Chip
Star rating: ★★☆☆☆
Amount saved: £118.06
Chip wants users to “save money without feeling it”. And at a basic level it manages that — the app connects to your bank account, works out an amount you can afford to save and transfers money into a separate savings account each week.
That “amount you can afford” is the key differentiating factor. By analysing past spending patterns, it should adapt to save more when you have a bit of extra cash, and less when things are tight. In my case, that’s not particularly essential — if I was a freelancer with unpredictable income or irregular hours, I could see the benefit.
I got a push notification before and after each saving, but otherwise my interactions with the app were minimal. This was a relief, because Chip’s incessant attempts to be down with the kids were a little cringeworthy.
By most definitions, the oldest millennials are well into their thirties. I like a cat video as much as the next person, but nevertheless I can read a few lines of text without needing an animated gif as encouragement. Sometimes I write whole sentences without using an emoji. So the infantilising left me a little :’(
Young people don’t struggle to save money because big banks fail to tell us when we’re #winning. They struggle because they have to pay half their income on rent or because real earnings have been stagnant since they were in secondary school.
This explains why Chip’s key selling point is simultaneously its fundamental shortcoming: the app works out what you can afford, but it can’t change what you can afford. It doesn’t work to change spending habits, so it didn’t really boost the savings I could have made anyway; it just put it in a slightly different place.
Putting apps to the test: Emma and You Need a Budget
Camilla Hodgson, FT reporter
App tested: Emma
Star rating: ★★★☆☆
Emma markets itself as a tool to help users take control of their finances, but if you lack financial self discipline, it won’t do much to end your bad habits. I sadly failed to save any more than usual during the trial — but I only have myself to blame.
The app uses Open Banking to connect to your bank accounts and credit cards and track your transactions in real time, separating repeated payments such as subscriptions and bills from daily spending. It then categorises your expenditure by vendor, allowing you to set monthly budgets for each.
To promote savings, Emma is supposed to prompt users to transfer an amount it thinks is affordable into a savings account at the end of each month. However, I never received one (I never have a lot of surplus, so perhaps the app didn’t want to get my hopes up about the possibility of getting a mortgage before I’m 50).
Emma is a more hands-off assistant. It’s down to you to chastise yourself and take remedial steps if you break your self-imposed rules. The app works like a financial tracker for adults, designed to promote your “financial health”.
While Emma keeps a running tally of your spending and account balances, it doesn’t have a week-by-week or month-by-month comparison feature which makes it difficult to track changes to spending habits or savings over time.
On a more positive note, the bills feature is useful for reminding you of subscriptions you don’t use or have forgotten to cancel — although you can’t cancel them directly via the app.
Although Emma will notify (or shame) you with a push notification if you go over budget or stray into an overdraft, this is as far as it will go. It essentially provided a list of my spending, much like a bank statement. If you’re looking for a financial intervention, this isn’t it.
Rianna Croxford, FT reporter
App tested: You Need a Budget (YNAB)
Star rating: ★★☆☆☆
Amount saved: £151.52
Of the many bad habits I picked up at university, being in denial of my bank balance ranked number one. I wanted an app that would keep me accountable, help me save and reset my habits. You Need a Budget (YNAB), the popular US app, promised to do just that.
YNAB works by “giving every dollar a job”. The user breaks down and assigns their income to different categories such as food, clothing and rent. These categories are then grouped more broadly to distinguish between funds for “immediate obligations”, “debts” and “just for fun”. By focusing on your current income, the app supposedly stops you from overspending. As my income varies monthly, I set myself an aspirational (read: tight) budget.
The app is geared towards debt management rather than savings. If you met your budgeting targets exactly, you wouldn’t save a penny. The “envelope” budgeting system is simple. The interface, however, looks like an Excel spreadsheet and so feels dated compared to its modern rivals.
While most budgeting apps are free, YNAB charges £65 a year, which somewhat defeats the purpose of “saving”. However, there is a 34-day free trial (if you remember to cancel it) and it is free for students. At the expense of a social life I managed to save £151.52 — although the subscription would have taken a bite out of that.
The downside of YNAB is that it only syncs directly with US and Canadian banks. For now, UK users have to input all of their expenses manually. I only made a saving because I was forced to be accountable and mindful of my purchases. In future I will use an app called Yolt that works similarly, but syncs with UK banks.
I may have saved the most of all the testers, but it felt like a one-off. A bit like using a calorie-counting app, most of the month was spent fighting the urge to stay in denial.
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