Each quarter, I review debt and credit numbers from the Federal Reserve Bank of New York. I also watch the annual income and spending figures from the Bureau of Labor Statistics. I study this data because I want to understand financial health. I don’t want to show horror stories. I want to see the truth. And the truth is that on average, most American households are doing fine. Not great. Not even good. But fine.
We earn enough income to cover our debt payments. We’re buying homes that go up in value and cars that go down in value. Sometimes we manage to throw a few bucks at a retirement account or pay off credit card debt.
However, “fine” frustrates me. I know that tweaking the average budget could move most Americans off the financial margin to financial stability. Most people could have a thousand dollars or more for an emergency within 2-3 months if they tried. The makers of Change saw this too. That’s why they created an app that nudges users to spend less and save more.
Their theory: small changes to your behavior can add up to big savings. I think they’re right. I also think that Change is the best app in today’s marketplace for promoting financial change. But before you download it, I’ll explain the details and explain one red flag.
What Is The Change App?
Change markets itself as an artificial intelligence that uses data science and behavioral economics to help you save money. Technically, that’s true, but it’s a lot of jargon.
In reality, Change looks at all your transactions and identifies areas for improvement. Then, the app sends you text messages that promote financial awareness and inspire financial changes. Some example texts that Change could send include the following:
- This is your account balance- way to end the month on a positive note!
- You might have forgotten about these small recurring payments: Netflix, Apple Storage
- You charged a total of $X to your credit card this weekend.
- You’ve spent $X on your auto loan this year.
- You’ve spent $X on your student loan this year.
- A recurring payment of $X adds up to $XXX over the course of a year.
The most important message you’ll receive comes at the end of each month. It contains a monthly cash flow statement (income and total expenses). It also shows a breakdown of spending habits. You could easily get this same statement from Personal Capital or Mint. The beauty of Change is that the message comes to you via text.
I want to be clear. These messages aren’t earth shattering. You could easily find these insights and more by combing through your budget. But Change exists because most people aren’t combing through their budgets line by line. It’s an incredible tool to promote financial awareness, so that you can make the necessary changes to promote financial wellness.
Change uses encryption and bank level security to keep your private information safe. I felt comfortable linking all my accounts to the app.
Caution: Don't Use The Auto-Save Functionality (Yet)
The Change app also has an auto saving component. The saving component works like Digit. An algorithm determines how much money you “could save” and withdraws it to a separate account. This is an awesome concept. It’s one that helps thousands of people save emergency funds, vacation funds and more.
I have no issues with the algorithm itself, but I didn’t turn on the auto-savings option. Why? Unlike Digit and other auto-saving programs the money that you save using Change goes into a “pooled” account. I don’t like having my money in an account that I don’t explicitly own. The “pooled” account isn't standard on any other auto-saving app. Based on my research, it's probably a growing pain rather than something fraudulent, but better safe than sorry.
Until Change offers each user their own FDIC insured account, I wouldn’t recommend using the auto saving feature. Although I trust the Change team, I’m worried about the potential for fraud. I would rather be safe than sorry.
Is The Change App For You?
If you already track every penny you might not need Change. Instead of focusing on marginal spending, you need to think creatively about earning more money and investing for wealth. Have you read our 10 Rules For Building Wealth? That's a great place to start.
For everyone else, Change is an excellent app. Almost everyone needs a nudge in the right direction, and Change can keep you on track.
Once again, stick to the text messages for now. As soon as Change moves away from the pooled account, I’ll update this review to put my full weight behind it. That's really all that's holding it back from being one of the best apps in the last 10 years.