Should you have money left each month but it just seems to vanish? If you are paying off debts, it is still useful to have a bit put aside so it’s easier to cope with unexpected problems.
This article looks at Plum Basic, an app that takes the hard work out of saving. It moves small amounts that you won’t miss from your bank account into a savings account several times a month.
(Originally this article also covered another very similar app called Chip. But that now charges some fees for this “automatic saving”. And they keep tinkering with a very complicated charging structure. It’s still not expensive, but if all you want is the stealth savings, then Plum looks cheaper to me.)
Plum saves for you “automatically”
Plum is a free app that can be downloaded from the Apple or Android stores.
This is how it works:
- you give the app access to your account via Open Banking;
- the app then looks at your income and spending pattern over the last few months and works out what you can afford to save now. This may only be a few pounds;
- Plum’s standard calculation of what to save can be cranked up if you feel it is too cautious or down if you are worried it is too large. There are 6 levels, starting with Shy and going up: Chilled, Normal (the default), Eager, Ambitious and Beast;
- this amount is then taken from your bank account by direct debit and put into a savings account for you;
- you can take money out of the savings account. This can be on the same day or next working day depending on when you ask for the withdrawal;
- you can “pause” the savings if you want – useful if you know you have a tight month coming up;
- you tell the app what you want by conducting a text message conversation with a “chatbot”.
You can also set up savings goals. For example you could say you want to save £400 by November for Christmas. Many people find putting a number and a date on your target gives them an incentive to save more.
Here are some of the things people have asked me:
How do I know it won’t take too much money?
It is designed to not take out so much you might need to use your overdraft. It can tell from the previous months that you always pay a loan payment in the third week of the month and your council tax in the first week of the month, so it can predict a lot of what will happen. And it knows how much you normally spend in a supermarket.
It promises to refund your overdraft fees if it gets this wrong! I haven’t heard of anyone who has had this problem.
If you feel nervous, you can change the app setting so that it “saves a bit less” for a month or two. Then once you are confident about that, dial it up to its normal rate.
What if I have an overdraft?
You can ask Plum to save when you are already overdrawn. In that case, of course, their “refund promise” doesn’t apply.
The issue of saving when you are in an overdraft is tricky. Mathematically it means you may be paying extra fees, but psychologically many people feel their only hope of clearing their overdraft is to put money aside so you can repay it all off at once and then start with a clean slate.
Is it safe?
A sensible question to ask when you are handing over your bank account details!
Your savings are ultimately sitting in “ring-fenced” accounts with Investec Bank. Plum calls these Savings Pockets. This means that it isn’t used to fund the day to day business of running Plum, so if they did go bust your money hasn’t been spent by them. You have FSCS protection for these savings.
What interest do they pay?
(NB these rates are correct in October 2023.)
Plum pays 3.51% for Basic subscribers.
You could get better rates in the best easy-access savings account, but not a lot.
I think the importance of Plum is that it lets people accumulate small savings who have never managed to save themselves. If that’s you, being able to save say £25 a month is worth a LOT more than the small amount of extra interest you could get in a different account where you have to save the money yourself.
With Plum you have the option to invest your savings in some investments. I don’t recommend this. it puts your money at risk, there are some fees charged and you may not always be able to sell the investments immediately. Most people reading Debt Camel are concerned about the safety of their savings and quick access, so putting them into investments probably isn’t a good option for you. Plum also has monthly charges for this as well as extra investment charges. For small savings amounts, these charges can really add up.
Other ways to save with Plum
It has other ways to save, see More ways to automate Plum but I don’t see the point – it seems better to increase the “automatic” savings levels to one you feel comfortable with.
What do people think of Plum?
Eileen who blogs at Your Money Sorted says:
Plum feels easy, fun and exciting. I love the fact that it randomly messages to say that it has transferred money into my savings – it feels like a lovely wee surprise when it does that.
It was really easy to set up and the process made me feel that it was safe and secure. Their help menu is excellent and any questions that I had were answered by the FAQ section.
One thing that I am not keen on is the fact that the money transferred into Plum seems to take quite a few days to clear. If you needed the money quickly, then it seems as though you would not be able to get it immediately, so that is something that people should bear in mind.
I would honestly recommend it to anyone because it really makes saving simple!
The delay in moving the money into your savings and having it cleared is a combination of the way direct debits work and the money laundering rules.
The result is that you can take your previous savings out very quickly, but the latest saving amount going through isn’t available to withdraw until it clears.
Dan, who is 23, wrote:
Not having to fill in an application form for Plum was good and easy to link up my bank account. Money comes back quickly when you ask for it. You can see a statement of your savings. After the start, you don’t need to do anything really unless you want to take money out, pause the saving or up/down the level.
I’m running in “chilled saving mood” which is 25% less than the normal mood. It’s not too much, I don’t miss the money and I might push up to the normal level soon, I was just cautious at the start.
My conclusion – give Plum a go!
If you feel you ought to have some money left at the end of the month but somehow never do, I suggest giving Plum a try.
It has worked for people who have never managed to save money every month before.
You can leave the money with Plum to accumulate into a small emergency fund. Or you could take it out at the end of each money and make a small extra payment to a credit card – that is a great way to clear a credit card faster.