SmartyPig bills itself as a new kind of savings account that helps you save for specific goals. You set up an account online, set up an automatic deposit into your new account and ask friends and family to make deposits to your SmartyPig account in lieu of gifts. SmartyPig even offers options for easy savings by a group of people towards a common goal — like if your extended family is putting together the money for an anniversary present for your grandparents.
On the surface, SmartyPig looks great! But I thought it would be worth digging a little deeper. First of all, what happens to the money you deposit? SmartyPig accounts are held by West Bank, an Iowa-based bank that is FDIC-insured. While West Bank’s parent company reported that profits are down this year they’ve also reported that part of that was because the business actually expanded. From what I can find online, I’m convinced that West Bank is a solid banks and I wouldn’t be worried about any deposits I had with them.
Second, is the interest rate SmartyPig is offering any better than what I can get with my existing savings accounts? SmartyPig’s interest is set at 3.90 percent APY — much better than many other savings accounts available. I use INGDirect, known for their great interest rates, and the interest they offer for their Electric Orange Savings Account is still only 3.40 percent APY. And possibly more importantly, SmartyPig charges no account fees, even for cashing out an account.
Lastly, how do I get my money out of a SmartyPig account? According to the SmartyPig FAQ, money can be withdrawn through two different methods: you can receive your savings, plus interest, on a SmartyPig MasterCard Debit Card, or you can receive your funds on a gift card from one of the many retailers SmartyPig has partnered with. There also seems to be a way to move your money directly back to the account you’ve been using to automatically add to your SmartyPig account. You don’t have to reach the goal listed on your account to withdraw your money, either. You can stop a goal at any time.
In general, the SmartyPig system seems pretty good. I like the idea of being able to share the goals that we’re each saving for. It seems like it’s easier to remember that a goal is a priority if other people know what you’re working for. Making it easy for friends and family to help you with your financial goals is just icing on the cake.
With the instant gratification that credit cards provide, it’s become more of a struggle for many people to save. SmartyPig and similar opportunities seem like they will make savings easier for those of us unsure where to start. Offering 3.90 percent interest definitely helps, too.
