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As a cost-of-living crisis brings a reckoning to our personal budgets, a good look at the budgeting apps that promise to bring our finances under control is long overdue.
Since the launch of Money Dashboard in 2009 and the later introduction of Open Banking technology that has enabled us to share our banking data seamlessly with apps, the industry has exploded with newcomers.
The most notable apps today include Budget by Koody, Moneyhub, Plum and Monzo.
Some of these apps offer a focused budgeting experience, while others are effectively a budgeting solution tacked onto a fully-fledged banking or payments service.
But are budgeting apps worth their cost in pounds or time? Or are they just an opportunity for a tech firm to sell us more products? In this article, we’ll explore some of the killer features of some of the UK’s most downloaded apps. To decide whether budgeting apps are worth it, we’ll focus on two key strengths of budgeting apps and weigh up whether the rewards are meaningful enough for us to recommend you use a budgeting app to manage your money.
Without even considering the details of specific features, interacting with a budgeting app will encourage you to think critically about your spending and will increase your awareness of how your spending habits can impact your bank balance.
It could be said that perhaps the greatest enemy of a healthy bank balance is ignorance: ignorance of the true cost of our purchases, ignorance of how much we’ve already spent in a month, and ignorance of whether we have sufficient cash left to be able to afford a compulsive purchase.
By regularly engaging with a budgeting app, you’ll find it much easier to hold yourself to account. You will always have your balance information readily to hand to help you make good decisions, and you’ll ‘see the consequences’ of purchases soon after you have made them.
By seeing the positive effects of ‘no’ and the negative effects of ‘yes’, a budgeting app can align your willpower with your financial objectives. By providing accurate feedback, apps can slowly train you to exercise greater restraint over your spending without any conscious effort BEING required.
That’s because your brain will make a quicker connection between the negative consequences of discretionary spending, which may then be enough to tip the balance of a decision the other way, in spite of the pull of a desirable product.
The more money you can tuck away in savings deposit accounts or maybe even an investment account, the faster you’ll see your savings grow over time.
The main way in which budgeting apps drive saving is that they give confidence to users about how much cash is needed to meet upcoming expenses. Budgeting apps that connect to your banking data, such as Moneyhub, can pre-populate a spending forecast automatically, but even manual apps, such as Budget by Koody, give plenty of power to predict the future. Most of our bills and payments follow a familiar pattern, and it will only take a few minutes to build a powerful prediction of your cash balance by the end of the month.
The Monzo app allows you to segregate your money into separate ‘pots’ to allow you to visualise the different future uses of your cash, similar to the envelope budgeting method.
One breed of budgeting apps goes a step further by pro-actively moving your money from your current account into a separate dedicated savings account automatically. Plum, for example, offers this feature without being a fully-fledged bank in its own right.
Certainly! Budgeting apps carry the real possibility of changing your relationship with money. By providing a frequent touch-point with live information about your spending and saving, a good budgeting app is certainly worth the time as it can change your spending habits for the better.
Most budgeting apps carry a very affordable fee, if any at all, as they’re aware of their cost-conscious user base. Therefore, an app usually only needs to encourage a single wise financial decision to have paid for itself in an instant.
You might also like: Best Budgeting Apps and 50/30/20 Budget Calculator.
See also: How to Start Budgeting as a Couple and How to Create a Budget in Six Easy Steps.
Every month, we’ll send you The Plug - a curation of the best personal finance content in the UK. We share real-life stories, how-to guides, top personal finance news, popular community questions, and tips to help you stay on top of your money.
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