Instinctively, I like smartphone apps that help people save and invest—especially for people who struggle with discipline around putting away money. Apps like Stash and Acorns, which put away pennies in the background, are an easy first step toward accumulating wealth.
But can an app really secure your future? If only it were that easy. Unless you have Warren Buffett’s pockets, your pocket change won’t be enough. With these apps, young people run the risk of thinking they are doing enough—and missing out on years of compound growth with higher savings.
That said let’s give technology its due. The Wall Street Journal recently highlighted a handful of apps that might benefit any young person. Along with Stash and Acorns, the piece mentions Digit, Qapital and Long Game. They are all a little different but automate saving essentially by going into your accounts and investing with spare change.
It’s easy. It’s a start. And it’s also a learning tool if you pay attention. Financial educators would do well to expose students to these apps—and use them to teach the value of investing regularly, and how small sums can build into meaningful savings over time.
They will also see that spare change, while helpful, is not nearly enough. Then proceed to the kind of devices that make a real difference: enrolling in your company’s savings plan, crafting a budget, having an emergency fund, living within your means, understanding the difference between wants and needs, knowing how to delay gratification.
I’m also a bit insecure about giving any app a connection to my personal accounts. I know. That makes me sound old. But I like being in control. It’s my money. Most reports of problems with these apps have been on the front-end, at the point of the transaction, not a more serious security breach on the back-end.
Still, I’d rather spend a little time managing my affairs and understanding them than handing things over to some bot developed by a tech whiz that as much as anything just wants to go public and move on.
Again, the apps have a certain appeal. Like any other financial tool, you get out what you put in. Seeing money accumulate can be motivating. Money that finds its way into a savings account demonstrates on some level that you can live just fine without spending every dime you make. That’s a good thing to learn. But even with these apps you need to keep an eye on your money. Mistakes happen and it is up to you to catch them.