Thirty-six years ago, just a couple of years after the spreadsheet, the first major consumer personal finance app was released for MS-DOS and the Apple II. It was called Quicken. Back then, computers were just starting to get personal, and not much is more personal than your money. It was the first of many, many money-management apps.
Today, such apps are a pervasive part of computing—not quite so big as, say, word processors, but as we’ve gone from DOS, to Windows, to web, and to mobile—money management has always been there. With billions of dollars of investment and software development hours behind it.
And so, almost four decades later, you’d think there’d be little room for innovation in the personal finance app space. But you’d be wrong. I love money management apps. Personal finance is a hobby of mine. And I can tell you: In 2019, the leading products are…just okay. And that’s not okay.
Right now, there are huge product opportunities for consumer apps in the personal finance space. Money apps can and should be better. Here’s why it matters.
Money Management = Anxiety Management
For a lot of people, money is scary, and managing it is hard. The money you have and the money you make represent the most vulnerable aspects of your adult identity: Your ability to support yourself and your family, your status in this world, your kids’ future, your ability to walk out of a job you hate, where and how you can live, your ability to get yourself or your loved ones the care and resources they need.
On my own path from a 20-something buried under student debt to a 40-something carrying a mortgage and a college savings account for my own child, there’s one thing about money that I’ve had to internalize: Money isn’t a friend, and it isn’t an enemy. Money is simply a tool–a tool of the powerful. Money gives you options, and options give you control of your life, and control of your life is power. Knowing how to make money work for you makes you more powerful.
If there’s anything consumer software should do for users, it’s empower them—to do something that’s hard more easily. To take the fear and uncertainty out of the numbers. To make doing the best thing the easy thing. Because money is so fraught, there’s no other class of app where there’s more opportunity to do that than in personal finance.
Too Broad or Too Targeted
That’s not to say there are no good products out there. But the current crop of market leaders and new entrants in the personal finance space suffer from one of two problems: they’re either too specialized, or too generic.
The newer wave of personal finance apps are often mobile-first, and aim for the most one-dimensional target users: beginner investors, people digging out of debt, die-hard budgeters, goal-based investors, and cost–cutters.
As a person who makes digital products, I appreciate the rationale behind focusing on one facet of personal finance and tackling that. As a user with several interlocking priorities in my financial life, I need to know how all the different parts work together.
That’s why I was a Microsoft Money user for about a decade, until I finally gave up spending my free time downloading OFX files and moved to Mint in 2009. Mint (and its ilk) lets you see all your transactions and account balances in a single place, set up goals and budgets, and then it generates dozens of customizable charts of your income and spending trends.
The problem with these birds-eye view, dashboard apps is that you have to connect all your accounts to them. They download all your transactions, and boom—they know a lot of things about you. A lot. Your salary, your credit card balances, whether you have kids, how much doggie daycare cost, how many times a month you order from Seamless or get a Lyft, how bad your Amazon habit really is. And in return you get… charts.
To Whom Much Is Given
Here’s the thing about any app which knows that much about you: it should give back at least as much—ideally more—value than it gets out of your personal information. This is why Mint and I have a complicated relationship. Mint knows everything financial about me, and yet it doesn’t help me as much as it could to manage my money. I keep hoping it’s going to tell me something I don’t know, other than that there’s a credit card I should sign up for, or that the cash I have in savings account might earn more if it were in an investment account. That’s not enough.
People who take the time to use finance apps earnestly want to be smarter about their money. There are several uncontroversial first principles that almost all personal finance experts and (fee-based) advisors agree on: Pay yourself first. Get rid of bad debt. Max out tax-advantaged accounts. Save up a 3–9 month emergency fund. Take advantage of 401(k) matching. Don’t let too much money sit in a savings account earning less interest than the inflation rate.
There’s a well-documented lack of basic financial literacy in the United States, so modern personal finance apps have an opportunity to be teaching tools. Tunnel-vision products sell you one angle, but every part of your money picture affects the rest. How do you prioritize getting out of debt versus saving for a house versus contributing to retirement versus dabbling in investing?
There are so many opportunities to help people out, and the too-generic products don’t go the extra mile—they only go as far as they need to to target ads to you.
Off the top of my head, here are a few insights I’d love to get from my money management app:
- It’s December 1st! If you donate X dollars to tax-deductible charities by the end of the month, you’ll save Y dollars on your income tax in April.
- People with your title in your industry in your region earn an annual salary of about $Xk more than you do. Maybe it’s time to consider negotiating a raise.
- Hey, it looks like you’ve got some tax-advantaged accounts that you haven’t maxed out. Consider transferring X dollars sitting in your savings account right now to your IRA before April 15th.
- Your company matches 5% of your 401k contribution, but you’re only putting in 3%. That’s X dollars you are missing out on getting paid every month.
- Looks like you spent $X on groceries last month—compared to other people in your area, that’s pretty high.
- FYI: Your rent or mortgage payment is 3% lower than the average family of three in your zip code. Way to get a deal!
You get the idea. Drawn from the numbers, human insights delivered in plain English beat out a chart any day of the week—with an option to respond, “Yep I know, don’t tell me about this again.”
From Education to Action
Let’s take it even further. People who use money apps are more likely to read personal finance books and blogs, listen to money podcasts, take online courses and go to seminars, or participate in personal finance online communities. Apps can build a fuller profile of its users’ goals based on one of the many, popular finance programs out there in the world. They could ask: Who’s your favorite personal finance expert? Are you reading Vicki Robin or Suze Orman or Mr. Money Moustache? Are you working the debt snowball or the Index Card or FIRE or all three? From there, recommendations and insights can get more specific, backed up by a whole world of books, calculators, worksheets, blogs, and online community behind them.
Can an app fix your finances? Of course not. Can a money app increase financial literacy? Absolutely. And it should, because the more savvy a user you are, the more money you’ll have to manage, and the better customer you’ll be down the road.