LONDON — When Welsh civil servant Amy Cunningham’s water bill dropped earlier this year, she used the money saved to top up the gas and electricity ‘savings jar’ to her digital bank account as she was bracing for higher energy prices.
Ms Cunningham, who set up her first ‘savings jar’ on the Monzo app to put money aside for her wedding, is among a growing number of Britons using personal finance apps to budget as rising energy and food costs push inflation to 30-year highs.
It now splits all of its earnings into such pots, helping it prepare for an expected rise in energy bills this month due to a 54% increase in the price cap by regulators.
“We now know exactly what pot is going up…and we know we have a bit of excess money in another pot should we ever need it,” Ms Cunningham, 38, said by phone from her home in the town of Merthyr Tydfil. in South Wales.
Rising spending seems to be prompting thousands of people to try money management apps for the first time.
Another tool of this type, Emmawas downloaded more than 2,000 times a day in January, according to the company, while the budget planning app To spy saw a 56% increase in downloads in the first quarter of 2022 compared to the previous three months, said co-founder Scott Mowbray.
“It’s definitely down to the pressure people are facing on the cost of living,” Mr Mowbray said.
With these users in mind, Snoop recently introduced a cost of living calculator that predicts how a user’s household bills might rise based on inflation, price cap increases, and historical of their expenses.
The digitalization of banking services and looser regulations have helped spark a fintech (financial technology) boom around the world, with users from Brazil to Indonesia embracing digital lending apps and budgeting apps.
But privacy advocates have warned that user data may not be protected on these apps, while financial experts say basic budgeting skills are still needed and older people and those who don’t are not comfortable with technology could be excluded.
“Apps are great tools, and if you’re a digital native, it’s a fantastic tool. But there’s a whole cohort of people who are a little more tech-averse,” said Russell Winnard, director from operating financial education to the charity Young Enterprise.
The average age of a Monzo the user is 32 years old, although nearly 100 of the app’s users are over 90, the company said. Snoop, meanwhile, seems to have a slightly older audience, with 40% of customers over the age of 45.
Kim Tracey, 58, a journalist from Yorkshire, started manually calculating her expenses from purchase receipts a week before the energy price cap was changed.
“It is difficult to make the transition (to technology). It’s definitely an age issue,” she told the Thomson Reuters Foundation, adding that she had struggled to find an app she felt comfortable with and in which she had confidence.
“Data leaks are clearly a concern. There is potentially a huge downside,” she added.
TOO OLD FOR TECH?
In 2018, Britain introduced the Open Banking Directive, which made it easier to share banking data and allowed fintech services to offer users all their banking data in one place.
While the global fintech boom has led to data breaches, particularly on digital lending platforms, the UK directive has helped boost financial inclusion, according to the Bank for International Settlements (BIS).
Among the roughly 200 companies registered with Open Banking in Britain are fintech companies providing services aimed at helping low-income or financially vulnerable groups manage their money, the BIS said.
But budgeting apps alone aren’t a panacea for the rising cost of living, said Anthony Villis, chief executive of financial planning firm First Wealth.
“(Tech) can only help you by being aware of your situation,” he said. “With the best financial advisors, the best technology, there’s not much you can do, and to say otherwise would be misleading.”
Mr Villis runs an Instagram page, Let’s Talk Money, which provides basic personal finance advice to young people, and has seen its number of followers more than double in the past year, he said .
There has also been an explosion of so-called “finfluencers,” or social media influencers offering financial advice.
Ms Cunningham, who follows many of these pages on Instagram, said she was not taught how to budget when she was young, so she is now trying to teach her eldest daughter to do so.
“It was a huge eye-opener, and I know I can pass that learning on to the kids,” she said. “I wish I had known that years and years ago, to be in a better position.”
“But he’s never too old to start.” — Beatrice Tridimas/Thomson Reuters Foundation