These days, many Americans live in a perpetual state of financial insecurity, either because they don’t have enough money or don’t have the regular income to plan ahead. Roughly half the population doesn’t have resources to cover an emergency (defined as having about $6,000 in spare income). And about one in three people now freelance in one form or another, which means dealing with the curse of “feast or famine.” Some months, they make plenty to cover their needs; other times, they’re barely scraping by.
It’s this irregular income issue that Jon Schlossberg and the team at Even are trying to address. Their app helps people smooth out the highs and lows in their income and offers an alternative to punitive forms of personal finance, like payday lending. Basically, you sign up, and the app makes an analysis of your bank account to work out your average monthly income. Then, it takes money away when you have more than your average, using that surplus either to cover low-income months, or to repay no-interest loans the startup also offers. It’s an app that turns irregular income into something like a salary. UPDATE: Right now, Even is just for full-time employees who work irregular hours and might make different amounts different weeks; support for freelancers should be rolling out sometime in 2016.
“The end result is that you get the same amount every pay cycle, which is fundamentally life-changing when you’re trying to make a budget and live your life without knowing knowing how much money you have,” Schlossberg says.
About a year and a year ago, Schlossberg sold the previous app he worked on–a password-helper called Knock To Unlock–which allowed him to take a few months off. He says he did a lot of reading and gradually became interested in how people behave when they have little spare income. He read a Science paper that claims that people on low-pay have “impaired cognitive function” (probably because they’re too stressed out all the time to think straight). Then he met his co-founder, Quinten Farmer, who had experience of living on limited means, and who suggested an online solution around income volatility. A few months later, Even was born.
Schlossberg argues that most savings products aren’t designed for people on low incomes. They’re meant for people who already have spare money with which to save. “All the tools that are designed to help people to save money don’t work for a lot of people who don’t have a lot of it. They only work for people who have money,” he says. “There’s this foundational inequality in the way the system works.” Studies show that people without bank accounts–a population Even doesn’t currently serve–spend up to $1,000 more on financial services than well-off people with bank accounts. Effectively, the more money you have, the less you pay for basic bank services.
Even’s business model is designed to keep people out of debt. It charges a flat $3-a-week fee and has no incentive to offer loans to its customers, as it makes no money from them. That’s different from a standard financial institution that makes money from distributing the largest loans on the longest periods possible, in order to maximize interest payments.
The startup is one of a new breed that’s helping people to save and live less precariously. We previously covered Digit, which automatically garnishes savings into a second account, and Puddle, a peer-to-peer credit network.
Even, which launched last year, is currently in beta and operates on an invite-only basis. It plans to open to the public some time next year, Schlossberg says.