Unlocking budgeting and saving secrets

Unveiling budgeting and saving secrets amidst a cost-of-living crisis. Revolutionise your finances with these top apps and discover how to manage and invest your money with the latest fintech tools.

Banking, yes… but not as we know it

The word “bank” used to conjure up images of grand, imposing, slightly forbidding buildings. And “banking” did not exactly set people’s hearts racing when they thought about what it involved.

Then all of a sudden, Fintech came along – a panoply of technologies and innovations that aim to supplement, improve and compete with traditional financial methods in the delivery of financial services. With a smartphone and a spare five minutes, you can download Moneybox, for example, and start investing the virtual spare change rattling around your wallet in a Stocks and Shares ISA. Or use Nutmeg to manage your investment portfolio according to your risk profile. Fed up with wasting a small fortune on foreign transaction fees and exchange rate commissions? Then download Revolut, cut out all those bank charges… and start commission-free stock trading on the New York Stock Exchange and NASDAQ as well.

This week, we take a look at some of the ways in which relatively straightforward money-saving apps can enhance your financial well-being… and even guide you towards sensible investment decisions.

Source: Snoop.

Reviewing your spending

As the cost-of-living crisis starts to bite, a number of apps have emerged designed to help you spend, save and live a smarter financial life. Broadly speaking, apps such as Snoop, Emma and Money Dashboard combine all of your accounts in one place so you can easily see what you’re spending and on which card. They can also check and notify you if you are overpaying on bills and purchases. Most are capable of generating personalised lists of ways in which you can spend money.

More often than not, they can look behind the scenes at your committed expenditure and help you find cheaper alternatives to phone or broadband contracts, and let you know if you have any wasteful or “stealth” subscriptions that you might want to get rid of.

Emma stands out from the others insofar as it is FCA registered, and money held in the Easy Access account is FSCS protected.

Spending money together

Living a rewarding life means living life in the company of others. But sharing costs can often be a source of fractious disagreement. Apps such as Splitwise and Kroo are designed to address that: they take some of the grind out of splitting bills with friends and family. They can also organise all shared expenses and IOUs in one place, so that everybody can see who they owe money to, and how much. These solutions are ideal for holidaying together as a group, splitting rent for university students or paying somebody back when they have footed the bill for lunch.

Source: Kroo.

Kroo does all the above, but is positioning itself as a socially conscious digital bank that wants to “change banking for the better”. Like its rivals Monzo and Starling, Kroo allows its customers to spend, track and settle up with their friends with just a few taps. But it is focused on pitching itself as the bank of choice for Gen Z and millennials: it will plant two trees for every current account opened (through its charity partner, One Tree Planted).

Digital nomads

The relationship that young people have with banking is not the same as the one that their parents had. Twentysomethings nowadays have no interest in being tethered to the 9-to-5 regime that governed the lives of previous generations. They don’t want to travel great distances and then have to queue to meet their bank manager. Instead, they want quick fixes to absolutely everything.

With one powerful, hand-held device they expect to be able to work, shop, play, date, book holidays, bank, trade and invest… all with minimum fuss and with as little in the way of financial outlay as possible. And they want to be able to do that in any country – particularly if they have multiple revenue streams in different currencies.

Apps like Revolut give you commission-free foreign exchange services, and you can hold and send money in 29 different currencies. It also has a range of features and functions for people who live life on the move – including travel insurance and discounted lounge passes for the world’s most popular airports.

Saving

The concept of loose change seems rather deprecated nowadays. But apps like Moneybox have come up with a system that rounds up your spending (your virtual loose change)… and puts the difference in a savings account or investment product. Or even your pension. It also has a feature to “boost” these roundups by doubling the amount saved. So if you buy a coffee for £2.50, the 50p saved can be increased to £1. The idea is that the small bits of “change” eventually combine, earning interest and generating savings while you spend.

Chip is another solution that appeals to “bad” savers. It helps you save cash by connecting to your various bank accounts and reviewing all your transactions. It then works out how much you could afford to save, based on your purchasing patterns. After that, it takes small amounts out of your account every few days – so small that theoretically, you won’t even notice. This money goes into savings or investment accounts, and the interest rates that it offers on cash savings are usually significantly higher than elsewhere.

Source: Moneybox.

Not spending what you don’t have!

This may seem obvious, but the key to saving money is not spending – particularly if you don’t have the money to spend in the first place! “Buy now, pay later” (BNPL) Fintech companies like Klarna and Clearpay provide payment processing services for the e-commerce industry, as well as managing store claims and customer payments. But while they may have excellent branding, they lack regulation and – according to some commentators – are lining up to be the next Wonga. The BNPL concept should not be sold as a lifestyle choice or a new high-tech way to pay. It should be seen for what it is: a debt.

But what about financial planners?

Money-saving apps can coexist happily alongside financial planners – just as burger joints can continue to sit alongside gourmet restaurants. The two need not necessarily be in competition or mutually exclusive. An app can build and rebalance an investment portfolio and give you the nudge you need to help you save. But it cannot help a client balance competing goals, deal with the financial and emotional impacts of divorce or help them navigate a path through investment opportunities. That’s what we are for. In short, not everything can (yet?) be done by an algorithm.

Final thoughts

We certainly do not shy away from using or recommending technology at IQ. We are continually focused on using the tools available to streamline our business and our modus operandi. But we do not see it as a means to an end. Instead, we use it for the routine aspects of financial management, allowing us to focus on the more nuanced and delicate tasks, such as selecting the right products, making decisions about asset allocation and thematic investing, and maximising the human touch that we believe is essential in managing your money.

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