Auto-saving apps like Chip, Plum and Cleo help us save thousands of pounds without noticing
SAVING money during a pandemic may seem impossible - but there are hundreds of thousands of people using auto-savings apps to boost their nest eggs without noticing.
Apps like Chip, Plum, Cleo and Tandem all use clever technology to work out how much you can afford to save and then automatically move money from your bank account into a separate savings pot.
Since signing up to Chip at the end of January, Margaret Carlin, 27, from Belfast has amassed more than £2,500 – with very little effort on her part.
Chip, which has a quarter of a million savers, uses an algorithm to see how much Margaret, who earns £37,000 a year, can afford to squirrel away – then stashes around £30-£50 into her savings pot each week.
Margaret, a software engineer, said: “This clever app is pretty good at working out how much it can take.
“This is money I could easily have spent online on things I didn’t need – or on takeaways – yet I don’t actually miss it.
“I don’t feel I’m being strict, yet I’m rewarded with a sizeable pot of savings.”
“I’d spent a lot over Christmas and had no money for an emergency.
“I knew I had to fix this, but needed to find a way to build savings without having to think too much about it.”
While web editor Katherine Toms, 38, started using Plum 18 months ago, and has saved around £1,500 without really having to do anything.
She is using this money to pay for furniture for her home in Ivybridge in South Devon – and also for holidays.
Katherine, who is a basic rate tax payer, said: “I was taken by the idea I could save small amounts at a time without really noticing.
“I use the ‘round ups’ setting which saves the change from my purchases each week.
“At the end of the month I can transfer anything still in my account into savings. The sums aren’t big, yet I’m always surprised by how much I’ve saved.
“Plum has also helped me become much more aware of how much I spend on stuff I don’t really need.
“During lockdown, I saved £40 in one month by not buying coffees.”
Plum has had more than 1 million people sign up in the UK.
While another app called Tandem also uses an algorithm to calculate how much you can afford to save each week.
It has a handful of useful ways to boost your savings including its “round-up” where purchases are rounded to the nearest pound and moved into savings.
As well as allowing users to set up a regular weekly deposit.
While Cleo does help with automatic savings - but it has a bit more sass.
It sends you messages and tips on how to make savings too.
You can even set up a “swear jar”, which puts money into a savings pot every time you spend on a purchase you want to avoid.
For example, you could be fined £1 for every UberEats takeaway you order or TopShop purchase you make.
Andrew Hagger from comparison site MoneyComms, said: “These apps offer a quick and easy way to start building savings.
“After a while, you don’t even realise you’re putting money aside – until you glance at your balance and get a pleasant surprise.”
But what are the downsides and is your cash safe?
On the downside, your money may not have the usual £85,000 per person protection via the Financial Services Compensation Scheme (FSCS), so if the app went bust, you could be at risk of losing your hard-earned cash.
The cash is usually protected by the FSCS scheme if it’s in an account that pays interest.
It’s also worth noting what kind of access you are giving the app.
The best ones only give you read-only access to your accounts, so if they were hacked scammers wouldn’t be able to transfer your money.
Not all bank accounts are compatible, so double check yours are.
Beware of charges too. From October with Chip only the first £100 you automatically save is free.
After that, you can still save manually for free, but will get charged £1.50 every 28 days for its auto-saving service.
Work out which one is best for you before you connect your accounts.
Don’t limit your savings to auto-apps alone
Some apps also pay little – or no – interest.
Tandem does pay 0.6% up to 0.7% interest - but you have to lock away your cash for one to three years.
It also doesn’t work with auto-savings cash, where savers get 0.5 per cent and upto £85,000 is protected.
Plum users can get 0.6%, while Chip has started rolling out 1% interest accounts.
Savings rates in general are super-low at the moment - but you can still beat these rates and get upto 0.96% for an easy access account or 1.5% for a fixed one.
With Plum you can also invest in a range of 10 funds, available through Plum Plus (costing £1 a month) or Plum Pro (£2.99 a month).
But you need to be aware that investing is not risk-free.
While these apps are ideal for topping up your savings, a better approach is likely to involve you squirreling money away into a traditional savings account.
That way, you will earn interest – while also benefiting from greater protection.
Anna Bowes, co-founder of savings site Savings Champion, said: “One of the best ways to get into the savings habit is to open a regular saver account and set up a direct debit to go into the account on payday.
Equally, if you’re looking to buy your first home at some point, don’t forget about the Lifetime Isa.
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