Saving money is hard. And trying to balance your bills, student loans, and retirement (while still having a little fun) can feel nearly impossible.
Heavily rooted in psychology, it uses a system of rules and rewards to encourage you to save for your goals. The most popular goals on the app are:
- Building up travel funds
- Paying off credit card debt and student loans
- Saving for a home, car, or wedding
As you can see, student loans are a priority on that list. In fact, more than 13,000 Qapital users list paying down student loans as one of their top savings goals.
I recently hopped on the phone with Qapital’s founder and CEO, George Friedman, to discuss millennials and loans – and how his tool can help them find the fun in finance.
A quick Qapital overview
Before we jump in, here’s a brief explanation of how Qapital works.
After signing up for Qapital – which is free to use – you connect it to your checking account and affiliated credit or debit card. Then you create savings goals like the ones listed above.
Then it’s time to make your rules – activities that automatically trigger a transfer of money from your checking account to a certain goal.
Here are some examples:
- Guilty pleasure: Contribute $1 to a goal every time you succumb to Starbucks.
- Spend less: Set a restaurant budget of $200 per month; if you only spend $175, the remainder goes towards a goal.
- Roundup: Every time you make a purchase, the change goes towards one of your goals.
- Set and forget: Every day, week, month, or paycheck, contribute a dollar amount or percentage towards a goal.
Now let’s dive into the interview (edited for brevity and clarity).
A conversation with Qapital’s founder
Student Loan Hero: Thanks for sitting down with me, George! To start, can you tell me why you started Qapital?
Friedman: We saw a need to help people transition from not saving money to making savings a little more rewarding.
We make it intentional, we make it automatic, and we make it fun – that component is very important, especially for millennials.
So are you targeting millennials?
Our average user age is 27. Sixty percent are female, 90 percent have attended college, and 65 percent have a college or graduate degree.
Qapital’s heavily based in psychology – Duke’s famed behavioral economist Dan Ariely is on your staff. Can you explain that?
We work with Dan on integrating his research and thoughts and best practices into our technology.
We’re always thinking: How do we make this a positive experience? Because that’s the true differentiation here. There’s only so much willpower you have – and around money, you just deplete it.
So we’re trying to introduce something that actually makes you feel great about every dollar you’re putting towards things you truly care about. That’s how we build positive momentum.
While we’re on the topic of achieving goals, let’s talk visualization. On Qapital, you can attach an image to each goal – why is that important?
Visualizing where small decisions add up is really, really powerful.
We found that when you upload a custom image to your goal, you save 50 percent more than the customers who just use our stock photos.
Those small technological and behavioral-science innovations make a big difference for how much and how fast you can save.
How can Qapital help you spend less money?
We’re not like Mint, making you ashamed of how much you spend or where you spend.
Qapital is more about bringing intention – and the trade-off between spending and saving – much closer together in the user experience. How do you allocate your dollars in a way that optimizes your financial happiness?
We show you [how you’re spending your money] in a very non-intrusive way. And make it very clear what your priorities are and what your goals are.
That’s interesting, because you’re not telling people where to put their money, or punishing them if they make a bad decision – it sounds like you’re just making them more aware.
I mean, our concept is super simple, but it falls apart if you don’t have intention or automation, or if it feels boring. It’s not about feeling like, “I’m going to now all of a sudden stop living,” right?
It’s more about finding those categories that you might be overspending in – that you’re not prioritizing.
We’re helping you think about discretionary spending and your goals as a tradeoff. And I think that’s a way more powerful way of thinking about money.
How would you recommend student loan borrowers use Qapital? Is there some kind of trade-off you’d recommend?
Well, student loans aren’t the sweet spot for a trade-off; the sweet spot is a trip in 12 months. For example, it’s easy to skip a dinner because you know you’re going to Italy next year – but skipping a dinner because you’re paying off your loans faster? That doesn’t work.
So we have intervals where you can automatically save every day, week, or month. The month – people have seen that before – but the week can add up to more money. And because it’s more frequent, it feels good. You get that positive feedback.
For student loans, would you suggest doing a concrete per-day or per-paycheck withdrawal, and then using a rule to save for another goal? Because I think that’s what many people struggle with: the feeling they can pay their student loans, but then they can’t do anything fun.
Yes, that’s right: Make a student loan goal and a fun goal. So you can see them both building up.
And just to clarify: When saving for, say, a student loan goal, users must still take the money out and pay their loans themselves, right? It’s not automatic?
Yeah, I mean, having $2,000 sitting in a savings account makes no sense – that should be paid off straightaway away instead.
So why are people doing it? Because they’re struggling to actually allocate or set up a system that builds that behavior.
That’s sort of how we looked at it from a student loan repayment angle; you might not optimally structure how you pay off this loan, but at least you’re saving for it and money adds up quickly.
And then you can pay it off in chunks, which is way better than not paying anything but the minimum, right?
I think [transferring out your money on] a monthly cadence is good, but if it discourages you and you stop doing it, then maybe every three months is better for you.
A big thanks to Friedman for chatting with us!
Here’s an idea: Why not set up an automatic payment for your loan’s minimum, then use Qapital to save up and pay off a bigger chunk every few months?
Those extra payments could save you a lot of money over time; to see just how much, check out our prepayment calculator.
By making extra payments on your loans, you could save thousands of dollars in interest – and be free of your loans years ahead of time.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.50% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.49% effective March 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.50% – 7.27%1||Undergrad & Graduate|
|2.50% – 7.12%3||Undergrad & Graduate|
|2.81% – 8.79%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.55% – 7.12%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|