With the prevalence of digital banks and Fintechs that make it easy to manage all your finances from your smartphone, I still see a hesitance when it comes to actually adopting solutions that are purely digital.
Most recently, a friend of mine got the terms & conditions from his broker (Comdirect in Germany) on a CD via snail mail. I mean, seriously it’s 2020, who owns a laptop with a CD player? On the other hand, it clearly shows the maturity of banks in terms of their digital transformation journey. Actually, managing your finances can be extremely easy.
Digital banking apps
Depending on your region, there are multiple options to choose from regarding a bank that let’s you completely manage your finances from your smartphone. Players include N26, Revolut, Chime (U.S. only), Bunq, Monzo (UK & U.S.).
They offer features ranging from spending round-ups, to multiple sub accounts and discounts including perks. Such feature bundles are obviously not for free, but since there is (almost) no interest on your bank account and some banks even start to charge a monthly fee to maintain its profitability, I have no issue with paying for a superior banking experience.
There are indeed free options, but these lack in my opinion some key features. Prices for a well-equipped account are usually around 7 to 10 bucks per month. As an example you will find below an overview of the various premium accounts and what benefits they offer:
- N26 You (9.90 EUR per month): Offers up to 5 free withdrawals, up to 10 Shared Spaces, free withdrawals worldwide, insurance package covering luggage losses and delays, local discounts and perks. N26 offers overdraft at 8.9% interest.
- Revolut Premium (7.99 EUR per month): Overseas medical insurance, insurance package around delayed baggage & flight delays, priority customer support, free inter currency changes, access to 5 crypto currencies, disposable virtual cards (e.g. one-time usage) and LoungeKey Pass access. No overdraft option.
- Monzo Current Accounts (0.00 USD): Overdrafts, money can be deposited via cash and cheques, account switching service, Savings Pots, transaction round-ups, automated savings, interest rate around 1,3%, FSCS banking license covers your money protected up to 85k pounds
- Bunq Premium (9.90 EUR): up to 25 sub accounts (unique IBANs 0,27% interest p.a.) transaction round-up, rules for sub accounts, bill splitting, 10 free worldwide withdrawals per month, TransferWise, group expenses, (sub)accounts can be “charged” individually with two seperate PINs, multiple virtual cards.
- Chime (0.00 USD): The bank currently has no premium account options. It offers free overdrafts, no foreign transaction fees, getting paid earlier, some rules in combination with an optional savings account and of course all the benefits that come with the smartphone such as instant notifications, login with TouchID, etc.
In terms of features, the most advanced banks are Revolut and Bunq with N26 having great potential, too. The list with the most customers is led by Revolut with 10+ million. Chime has 8+ million, N26 has more than 5 million, Monzo 3.5+ million and Bunq somewhere below 1 million.
Revolut has a very advanced analytics dashboard predicting your future account balance, while the other banks only show current expense habits (e.g. spending categories).
Feel free to use my N26 invite code,
Digital Investing Apps
Once you have structured your finances in nice little sub accounts, investing your savings is probably the most important part. Since banks won’t give any high yielding interest, you may have a look towards ETFs or stocks in general. Depending on your region, several brokers are available that offer a true mobile-first product. If you live in the U.S. there is of course Robin Hood, Germany and Austria has a decent player named Trade Republic and the Netherlands has a player named BUX, which is also available in other countries, such as Germany.
Personally, I am using Trade Republic. It served me well over the last year due to its simplicity and ease of use. They added multiple savings plan features during 2019 with new ones already planned.
At this point you need to be self-aware in terms of one thing in particular: The time you want to spend with analyzing companies (balance sheets and qualitative analysis including their value proposition and strategy ahead). Successful investors like Benjamin Graham suggest putting 25% of savings into individual stocks for “hobby investors” and 75% into bonds (of course nowadays they are extremely unattractive and an index fund is probably more appropriate). The institutional investor should put 75% into individual stocks and 25% into something more stable (index fund).
My personal preference is putting 50% to 75% into individual stocks and the rest goes into an index fund. I enjoy analyzing companies and, therefore, I view the time spent on this exercise before making an investment decision as crucial and fun. For more details, check out my articles on starting investing and 5 value investing figures.
Trade Republic offers stock trading, derivatives trading, commodities (gold, silver, …) and free ETF saving plans. There are some nice little feature including the quick-to-adjust tax exemption, automatic tax settlements and the tax statement that is provided every year. This is something that Bux doesn’t offer at least in non-Netherlands countries.
In terms of features, Robin Hood is clearly ahead with its product, but only available in the U.S. It includes stocks, funds, options, gold and a staggering 0.3% (sarcasm) on not invested cash. They offer fractional shares, stop/loss orders and a news/notifications tab that let’s you customize what information regarding a stock in particular you want to read. On their website they offer detailed advice in case you are new to investing.
Revolut actually offers sort of commission-free stock trading within its mobile app including fractional shares. Metal customers enjoy unlimited trades, whereas Premium customers 8 trades per month. There is a 10.000 USD limit on orders and, additionally, there is an annual market custody fee of 0.01% of your assets. One app to manage everything!
In the end, such apps are just a tool to save and invest the money you earn. To me the most important thing is the true mobile-first approach that allows to manage all my finances on my smartphone. This saves me time and gives me a simple overview at a glance.
I see only a few points for improvement: A web interface for people who struggle going smartphone-only and support for multiple devices (phone of your partner or iPad app, etc.)
Below I have provided you with the links to the investing apps mentioned in the article that help you better manage your finances: