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Understanding Cash Analysis

Betterment's cash analysis provides you with feedback on how much extra cash you may be holding in your checking account, so you can earn more.

Articles by Volodymyr Chernat

By Volodymyr Chernat
Senior Quantitative Researcher, Betterment
Published: November 5, 2018 | Updated: October 22, 2019

Our cash analysis automatically gathers information on your spending patterns in your linked checking account and provides you with feedback on your account balance.

By default, we offer Betterment Everyday™ Cash Reserve as a place to hold your extra cash to earn more than you might in your checking account.

As your financial advisor, our aim is to help you make more effective decisions with your money. For most people, good decision-making and advice starts with evaluating your cash flow to determine how to prioritize your regular investing habits. But, the truth is doing this manually and on your own is hard work. To help with this, Betterment is now offering cash analysis.

TABLE OF CONTENTS

  1. How does Betterment analyze your cash?
  2. How do we analyze your checking account?
  3. What can you do with extra cash?
  4. How will you know when you have extra cash?
  5. Details to Remember About Our Cash Analysis

Ready to find your extra cash?

How does Betterment analyze your cash?

Betterment’s cash analysis aims to identify any extra cash in your linked checking account that could be earning you more. Our in-depth analysis automatically gathers information on your spending patterns in your linked checking account and provides you with feedback on your checking account balance. You’ll find our analysis and recommendation from “Home” when you log in to Betterment. We update our cash analysis regularly, letting you know you may have extra cash that might earn a higher yield in a different account, such as Betterment Everyday™ Cash Reserve.

How do we analyze your checking account?

We make a prediction about future expenses by looking at your last year of expenses. To get a better idea of your ongoing expenses, we filter out and remove very large, one-off expenses. We consider expenses to be large or one-off if they are over either the greater of $5,000 or the 99th percentile of all your expenses. If multiple expenses occur on the same day, we’ll add all of those expense totals together as if it was all one expense.

To make the forecast, we average the last year of the combined, filtered expenses and scale by the upper and lower bounds of the forecast period (21 days and 35 days).

Our predictions are updated on a regular basis as new expense data is available, which means that you may see them change from day to day.

To further understand Betterment’s cash analysis, read the full methodology.

What can you do with extra cash?

Since our cash analysis tells you when you may be holding extra cash, naturally, you may ask: “What should I do with my extra cash?”

Over the long-term, our advice is to identify your goals and consider deposit toward your goals—as Betterment is set up to help you do. By default, we offer Betterment Everyday™ Cash Reserve as a place to hold your extra cash to earn more than you might in your checking account. Our account is designed to earn a high yield. It will act as the holding place for the cash, until you make a decision to move it into a more defined investment goal or withdraw it for spending purposes.

How will you know when you have extra cash?

Since your checking account will inevitably see new deposits over time—and our prediction of your target balance will update too—then you may be wondering how you’ll find out when you have extra cash available.

You can log in to Betterment to see our most recent analysis of whether you have extra cash, as long as your checking account remains linked and active.

3 Details to Remember about Our Cash Analysis

  • Betterment’s cash analysis will update regularly. As time moves forward, you can continue to log in to Betterment and see our cash analysis feedback for you anytime from “Home.”
  • Betterment only analyzes spending patterns in your linked checking account. To receive the analysis, your account must be connected using our normal connection, managed by our partner, Quovo. If you’ve manually linked your bank account, you will not receive cash analysis.
  • Only one bank account can be analyzed currently. You can only link one checking account to Betterment for deposits and withdrawals, so we’ll only analyze that account. If you’ve synced other bank accounts to Betterment to see your balances, those accounts are not used in our cash analysis.

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Betterment Everyday Cash Reserve

Betterment Everyday Cash Reserve (“Cash Reserve”) is offered by Betterment LLC. Clients of Betterment LLC may participate in Cash Reserve through their brokerage account held at Betterment Securities. Neither Betterment LLC nor any of its affiliates is a bank. Through Cash Reserve, clients’ funds are deposited into one or more banks (“Program Banks“) where the funds earn a variable interest rate and are eligible for FDIC insurance.  Cash Reserve provides Betterment clients with the opportunity to earn interest on cash intended to purchase securities with through Betterment LLC and Betterment Securities.  Cash Reserve should not be viewed as a long-term investment option. 

Funds held in your brokerage account are not FDIC-insured but are protected by SIPC. Funds in transit to or from Program Banks are generally not FDIC-insured but are protected by SIPC, except when those funds are held in a sweep account following a deposit or prior to a withdrawal, at which time funds are eligible for FDIC insurance but are not protected by SIPC. See Betterment Client Agreements for further details.  Funds deposited into Cash Reserve are eligible for up to $1,000,000.00 of FDIC insurance once the funds reach one or more Program Banks (up to $250,000 each at  up to four Program Banks). Even if there are more than four Program Banks, Clients will not necessarily have deposits allocated in a manner that will provide FDIC insurance above $1,000,000. The FDIC calculates the insurance limits based on all accounts held in the same insurable capacity at a bank, not just cash in Cash Reserve. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through Cash Reserve may be lower. Clients are responsible for monitoring their total assets at each Program Bank, including existing deposits held at Program Banks outside of Cash Reserve, to ensure FDIC insurance limits are not exceeded, which could result in some funds being uninsured.  For more information on FDIC insurance please visit www.FDIC.gov. Deposits held in Program Banks are not protected by SIPC. For more information see the full terms and conditions and Betterment LLC’s Form ADV Part II.

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