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.
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