47% of Americans cannot survive a financial shock of over $500. Therefore, we wanted to create a user-friendly app which would allow individuals to save for a three-month emergency fund. The app is designed for 25-35 year olds living below the median household income, which is estimated to be around $50,000 according to the U.S. Census Bureau. Since one of the hardest barriers to saving is not having enough income, this app would encourage saving and budgeting for those who are working with too little income. The user’s target goal will be $5000 for 3 months of runway without a job.
How the App Works
First, the user will input their bank and credit card information. The app’s algorithm will then observe the user’s historical spending patterns and suggest a recommended weekly budget for spendable money. Spendable money will be calculated as cash that can be spent after major expenses (i.e., rent, utilities, phone, etc.). Therefore, spendable money will be funds which should be spent on food and other day-to-day expenses. Users will have the ability to add major expenses that may not be reflected in the algorithm (i.e., car repairs) and will also be able to adjust their weekly budget as they see fit.
For each major and day-to-day expense, the app’s algorithm will also aggregate data from other users in the area. Therefore, each user will be able to see where their spending is in relation to other users. For example, if their electricity bill is higher than the average user in that zip code, then the user will be able to see where they fall within the range of use. The app will also provide cost-savings tips related to such expenses.
Each week, the app reassesses how much the user can spend over the next week. Users will receive a text message at the end of each week showing the remaining balance of spendable money. The remaining balance each week will be deposited into a savings account, as users save towards their three-month emergency fund.
This app encourages individuals to become more aware of their spending habits and budget accordingly. Additionally, it offers cost-saving tips while empowering users to save for a rainy day.
Sources:
http://www.pewtrusts.org/~/media/assets/2015/10/emergency-savings-report-1_artfinal.pdf
http://hbswk.hbs.edu/item/innovative-ways-to-encourage-personal-savings
