There is no shortage of finance apps that purport to fast-track your money life.
But do they save you money? Are they worth the trouble?
We’ve waded into the fields of fintech to find three ways these programs will boost your finances.
1. Discover better discounts and perks
Unless you enjoy continually comparison shopping at multiple outlets for every purchase, you may as well let a bot do it. As you buy things, these apps work in the background of your purchases to ensure you don’t overpay, miss out on an already earned benefit or buy something that’s cheaper elsewhere.
Sift works with your credit card and lets you know of a benefit when you buy something. For example, your cards may offer trip cancellation protection, flight delay insurance, car rental insurance, lost luggage insurance, extended warranties, theft protection, and the ability to get some or all of your money back if you find something cheaper elsewhere. But it’s a lot to track on your own.
Sift streamlines the process of getting reimbursed or making a claim. The founder, Abhinav Dubey, says the average user saves 5% of what they spend a year in addition to expenses they avoid. The service is currently free.
Similarly there’s Earny, which scans your receipts and searches for better prices elsewhere. When there’s an opportunity to get the difference back, because of store or credit card price protection policies, Earny files for it and refunds your money.
Earny keeps 25% of what you get back — which is pretty steep — but the company is betting the likelihood of you bothering to look for the cash back opportunities on your own is pretty low. The average refund is $ 8 and a typical user gets $ 100 a year on about 13 different purchases.
You can also install Honey, a Chrome browser extension that searches for coupon codes so you get the best deal.
2. Finding more money to save
With Acorns your purchases are rounded up to the nearest dollar and the difference is deposited into an investment portfolio in $ 5 increments. The portfolios range in risk-tolerance with a mix of equity and bond exchange traded funds (ETFs). According to the company, Acorns users who use the round up feature see an average monthly account balance growth of $ 45 in their investments over those who are only directly investing. The fee is $ 1 a month on accounts under $ 5,000.
With Digit, the bot tracks the amounts going into and out of your checking account, saves an amount it determines you won’t need, and puts it into a Digit account. The service is free for the first 100 days and costs $ 2.99 a month thereafter.
3. Tax tallying
Robots can also help with the taxable events resulting from selling investments.
Betterment offers tax-loss harvesting, a process of selling a security that’s taken a loss. By realizing, or “harvesting” a loss, investors can offset taxes on both gains and income.
To recreate the process yourself, an investor would need to go in and look at every share you’ve ever bought, including from new deposits, reinvested dividends and rebalancing, and determine if that specific share is at a loss, says Dan Egan, director of behavioral finance and investments at Betterment. You then need to consider if tax loss harvesting that share would result in a wash sale based on the purchase dates and prices of other shares.
“It is an extremely onerous thing for a person, but it is perfect for an algorithm,” he said.
In addition, the financial platform offers a tax impact preview, so that you can see the tax implications of any action before you make a move. After rolling it out a few years ago, Egan said, people who were shown the tax impact of a potential allocation change were 70% less likely to go through with it.
Bots also help the investment service M1 Finance to minimize your taxes by executing your sale of securities by prioritizing lots that don’t result in any tax liability first, followed by a more favorable long-term capital gains rate and lastly a short term capital gains tax rate, which is the same rate as ordinary income.