If you’re like me and you dread managing your finances, you’re not alone. It may not make you feel any better, but it turns out we have a good excuse. When it comes to dealing with financial decisions, our human brains simply aren’t wired for it. That’s according to scientists, aka behavioral economists who’ve uncovered the many ways in which we humans make seemingly irrational money mistakes in a fairly predictable fashion.
One of our major money follies: we just don’t save enough, and we can thank our tendency to optimize for the short term rather than the long term. A recent survey from the Institute for the Future found that 53 percent of Americans rarely or never think about something that might happen 30 years from today. This brain-glitch, which scientists call “temporal discounting,” is one the primary reasons why so many Americans today can count less than $500 in total savings.
So, how can you manage and save money when the odds are stacked against you? The answer: automation. In other words, set up a system that takes yourself out of day-to-day decisions about your finances so that you don’t have to think about them. With financial automation, you create a set of default money decisions that allow you to get out of your own way.
The best part: financial automation works! And we have the data to prove it.
In January of 2016, we announced our “Save When I Spend” feature, which automatically rounds up members’ Chime card transactions to the nearest dollar and transfers the round up to savings. We also reward those who opt-in to this feature with a 10 percent cash bonus on Round Ups each week. This feature quickly became one of the top reasons members love Chime.
Building on the success of “Save When I Spend”, we recently launched a new Automatic Savings feature called “Save When I Get Paid,” in beta. Using a “pay yourself first” approach, the new feature automatically transfers ten percent of a member’s’ paycheck to savings as soon as it arrives. One of the most important aspects of this feature was making it easy to get started and we designed it so that members can enroll in the program with one tap from the Chime app.
Automation Works and Here’s the Data to Prove it.
We’re excited to share the initial results from our beta launch of “Save When I Get Paid”. The headline — those who’ve enrolled in Chime’s automatic savings programs saved over 3x per month more compared to members not enrolled in any automatic savings program. Here’s how much people saved during the February and March beta test by group:
- Members not enrolled in Chime’s automatic savings programs saved $113 per month on average.
- Members enrolled in “Save When I Spend” saved $217/month on average compared to those not enrolled (a 92% increase or almost 2x)
- Members enrolled in both “Save When I Spend” and “Save When I Get Paid” saved $382/month on average compared those not enrolled (a 240 percent increase or more than 3x)
Why Does It Matter?
While personal finance experts typically recommend having an emergency fund equal to three to six months of expenses, according to a recent study by GoBankingRates, most Americans have less than $500 in total savings. At the same time, most banks continue to rely on fees as a primary revenue source. In fact, the average American pays around $330 dollars in bank fees annually and banks made over $33 Billion in overdraft fees alone in 2016.
We think that needs to change.
We designed our automatic savings program to help members overcome the hurdle of getting started with a healthy savings habit by making it nearly effortless to sign up, and even easier to keep up. By taking small steps, members are able to achieve their short-term savings goals such as creating an emergency fund or setting aside funds for a major purchase. We’re also proud to also help members avoid the typical bank fees that are chipping away at the savings potential of many Americans.
If you want to take the steps toward creating your own healthy financial future, we invite you to join Chime and stay tuned for more features to help you automate your finances. Based on member feedback from our the beta, we plan to introduce new automatic savings options such as allowing you to set a specific savings percentage for each paycheck.
How to Start: Automate Your Savings Today in 3 Steps
Step #1: Join Chime and you can start saving money automatically! Sign-up today.
Step #2: Enroll in Save When I Spend. Every time you pay a bill or make a purchase with your Chime card, we round up the transaction amount to the nearest dollar and transfer the round-up from your Spending account into your Chime Savings account. Use your card just twice a day over the course of a year and you’ll have $400 in savings at the end of the year. Doesn’t get much easier than that.
Step #3: Enroll in Save When I Get Paid. First you’ll need to set up direct deposit by providing your employer with your Chime account number and bank routing number. You can find this information in the Chime mobile banking app by tapping “Move Money.” Then tap on the gear icon in the mobile app and enable “Save When I Get Paid.” Once enabled, 10% of every paycheck will be automatically transferred into your Chime Savings Account as soon as it arrives.