Since Apple launched its iPhone App Store in July 2008, the mobile applications market has exploded.
In 2016, Statista reported that Apple customers had downloaded 130 billion apps. On the other side of the smart phone universe, Android users have downloaded 65 billion apps since the Google Play launch in 2010.1
To put those numbers in perspective, that’s over 26 apps downloaded for every person on the planet.2
While many of these apps are games and social media programs, an increasing number have been developed to help individuals with their personal finances. Which leads to an interesting question: what should you look for in a personal finance app?
Tip: Like any good tool, apps are as useful as you make them. An app may be able to help with financial decisions and transactions, but it won’t get you to stick to a budget.
One of the first things to consider is what type of financial apps may be most useful. Bankrate.com breaks them into four categories:
Budget tracking apps allow users to record expenditures as they are made to keep track of bank balances and budget categories. Some allow users to make a budget and then watch how closely expenditures are tracking to it.
Financial assistant apps collect, store, and report information from users’ various savings and investment accounts, providing a single place to keep track of asset performance.
Loan calculator apps estimate payments and current balances for loans. Some also track how long it will take to pay off one or more loans.
Spending and saving apps allow users to perform a wide-range of activities, including “what if” scenarios.
Source: Statista.com, 2017
Once a user has decided on a category of app that may be useful, there are additional criteria to consider.
Credibility. As everyone knows, not everything written on the internet is true. For example, The Wall Street Journal and The New York Times are generally considered more credible than an anonymous blog. The same principle applies to apps: understand who’s providing the information.
Security. Before using any financial app, read the privacy or security statement. This can typically be found at the bottom of the company's web page or in the About section of their website. If you don't find one online, contact the company to request a copy.
Clarity. A personal finance app should provide information that is easy to understand. There are some apps that provide detailed charts on stock performance using a wide variety of financial analyses. However, if you don’t understand the underlying analysis, the app may be useless.
Relevance. Remember the old saying: “If the only tool you have is a hammer, you tend to see every problem as a nail.”3 The same applies to financial information. A mutual fund company may be a great source of information about mutual funds, but it may be less useful at providing information about estate planning.
Using an app to help with your personal finances may be a great first step in becoming a better money manager. And asking yourself a few key questions before you download may help you select the app that best fits your personal finance needs.