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The people at SmartyPig contacted me recently to offer a $100 gift card for use on their site to a Consumerism Commentary reader.
SmartyPig has been mentioned on a few personal finance blogs recently, and here’s the deal. SmartyPig is a savings account, FDIC insured, currently earning 4.30% APY. Depositors’ funds are held by West Bank, an institution based in Iowa (not the Middle East as the name might suggest). The draw of SmartyPig is that the account is tied to specific saving goals.
For example, if you are planning to buy an engagement ring, you can create an interest-bearing account with SmartyPig directed towards that goal. After creating the savings account, you can “share” the account with others, such as friends, who can contribute to your savings goal. The inspiration comes from 529 education accounts, which are designed with a specific goal in mind (education for children or another family member) and allow contributions from others.
My take
The philosophy behind SmartyPig is refreshing. Saving towards goals is important, and any method of “sharing” your goals with others, publicizing to the world (or your circle of friends), can only be a positive influence. There are many media reports across the United States about our average citizen savings rate, and in many ways of measuring, as a whole our society may be spending more than we earn. Encouraging savings can help to move this measurement in a positive direction.
Unfortunately, I don’t see SmartyPig as a perfect solution to the problem of savings towards goals. Customers should be aware of some fees that SmartyPig may charge. First of all, contributions towards your goals at SmartyPig are generally initiated through an automatic monthly contribution. Make sure your funding source always has funds available. Otherwise, you will be subject to a $25 insufficient funds fee. This fee itself is worth mentioning, although it’s fairly typical in comparison with other banks.
It’s worth noting that SmartyPig is designed to be most beneficial when savings towards a specific spending goal, like the engagement mentioned earlier or a high-definition television. If you have a savings goal, like an emergency fund, you might be better off placing your funds in a no-fee, high-interest savings account.
Here’s why. To redeem your funds from SmartyPig once your goal has been reached, you can opt for receiving either a pre-paid MasterCard debit card or a gift card at a number of retailers. The list of retail shops offering gift cards include Best Buy, Amazon.com, Marriott, Home Depot, and Babies ‘R Us. If you opt to redeem your savings in the form of a retail gift card, you will receive a bonus up to 5% of your savings.
That’s not a bad deal, but there’s a catch. If you’d prefer to close your SmartyPig account once reaching your goal and receive your funds in the form of a check, you will be charged a $25 fee. To withdraw your own money, you must pay $25. This is unlike any other savings account of which I am aware. Bank-to-bank transfers out of the SmartyPig account are not allowed to encourage sticking to your goals.
Although SmartyPig encourages sharing your goals with family and friends in the interest of motivation and progress, it’s actually in the company’s financial interest. Anyone who contributes to a savings goal other than their own, including your friends who contribute to your account, will be charged a $4.95 fee for the privilege. This fee will change to 2.9% for contributions funded by credit card and eliminated for contributions funded by a linked savings or checking account.
The bottom line
SmartyPig presents a unique approach to reaching and sharing your savings goals. Once you open your account and set your first goal, your contributions—and the contributions of your friends and family—will earn a high interest rate. The bonus of up to 5% when you redeem your savings is more than you can get from credit cards and is a contributing factor to my recommendation.
If you know that you need to save incrementally to spend a sum of money on an item that is accessible via one of the vendors that have “partnered” with SmartyPig, this account can be a fun and motivating way to save for your spending goal, if you’re careful to avoid fees. Other people, habitual savers for example, will get better bang for their saved buck in a more liquid savings account at a bank offering high-yield interest rates, where withdrawals are free at any time.
$100 giveaway
Is SmartyPig for you? If so, I have a $100 gift card for you, redeemable only in a SmaryPig account. Write a comment below to tell me about your savings goal, and I will choose a winner randomly in the near future. This offer is only valid for individuals with mailing addresses in the United States or Canada and only one entry per name, email address, or IP address is permitted. Please leave a valid email address so I can contact you if you’re selected. If you don’t want to write about your savings goal, that’s fine, too. Any comment here will contribute towards your entry in the giveaway.
Good luck!
March 25th, 2008 at 9:22 am
It’s an interesting idea however I think it will not be a big hit to most PF bloggers since we tend to despise any fee. If I win the gift card I will give the service a chance. Thanks!
Jeff
March 25th, 2008 at 9:24 am
I have two savings goals. I am trying to get 10,000 in emergency funds (currently at 5,500) and then I am saving to remodel my bathrooms. I haven’t got an estimate on the second one yet but I am hoping I can get it for under 6,000.
March 25th, 2008 at 9:24 am
Minus the fees, I think SmartyPig is a fantastic idea. Their minimum savings goal is $250 and most households will spend $250(or more) on something in the future, why not get 4.3% on top of that or an extra 5%(up to).
There have been many creative ways to use SmartyPig brought up on some of the other blogs:
~Wedding Registry
~Savings Education for Children
~College savings (for books and such)
~Community fundraising
I personally have 2 savings goals on SmartyPig. Since my wife and I just bought a house, we need furniture so our savings goals are bedroom and living room furniture.
I’ll soon have a 3rd, which will be a trip to Europe next year, but I haven’t decided on how much to budget.
March 25th, 2008 at 9:33 am
Interesting concept! Not necessarily for the poor planners, though.
Jonathan
March 25th, 2008 at 9:45 am
If it weren’t for the fees I’d probably sign up. I’d think a slightly lower interest rate and no fees would get more people to contribute, and therefore increase their profits.
March 25th, 2008 at 10:02 am
We are saving up for a vacation this summer to the beach!
March 25th, 2008 at 10:04 am
Flexo, thanks for the post! As you pointed out, within the next 48 hours we will be updating our public contribution and gift card fees. SmartyPig customers will be able to make contributions to other SmartyPig users’ goals and buy gift cards at NO cost if they use their existing SmartyPig funding source, i.e. their checking or savings account. Our fee to make a contribution or buy a gift card using a credit card will be set at a flat 2.9% (roughly what it costs to use PayPal), and we are also planning on releasing a few other payment options in the future, as well, so that using SmartyPig will be economical for all users. It is in our best interest to make the SmartyPig user experience the best possible, thus our quick action. Thanks, Jon Gaskell, Co-Founder SmartyPig
March 25th, 2008 at 10:06 am
trying to save up for a four unit apartment building, every little bit helps.
March 25th, 2008 at 10:35 am
Just graduating college with a job in NYC. Need to get an apartment and furnish it…plenty of goals to choose from: a bed, desk, other furniture, tv, brokers fee/deposit, etc. Help out a recent graduate who is burdened with debt!
March 25th, 2008 at 10:43 am
I’ve got several things I’m saving for, but this account would be used to save for a vacation for my wife and I. We want to see Europe before starting a family.
March 25th, 2008 at 11:10 am
We’re saving for several things, including some new furniture and yard equipment.
March 25th, 2008 at 11:43 am
It’s an interesting idea, but that $25 fee is pretty bad. If they had a $25 bonus to open the account, maybe I’d change my mind (a free $100 would also do it). I’m going to need a new (used) car in the next couple years, so I want to put about 6k aside. But I’m pretty sure I would want it as cash, not a credit card.
March 25th, 2008 at 12:04 pm
I know quite a bit about this product and the bank (West Bank) – a couple of former colleagues work there.
I’m not wild about fees, but since I am getting married later this year, I’d set up a SmartyPig account if I had $100 to seed it.
March 25th, 2008 at 1:28 pm
Great idea! Wish I’d thought of it. Not sure I’d do it, except for that $100 gift certificate, but since you’ve got a giveaway, I’m in! I’ve got some major dental work coming up, so I guess that’s what I’d save for.
March 25th, 2008 at 1:33 pm
sounds a little tricky to maneuver around the fees and other fine print. am considering saving for a good, used car but don’t know if my friends and family would want to contribute to it since they have their own problems!
thanks for the post, theres certainly no harm in checking out new ideas. thanks for your efforts.
March 25th, 2008 at 1:43 pm
Interesting service.
I need to set up an emergency fund, and the $25 redemption fee wouldn’t be bad as an incentive to not have emergencies.
(Really I just want the $100).
March 25th, 2008 at 1:54 pm
I’ve had an issue with the fee for family and friends to make contributions since the first post I read about this new “service”. Now that I hear about the $25 account closure fee, I’m even more incensed. However, I do have a goal I will be saving towards: eventual replacement of my 7-year-old laptop. SEVEN years is a lifetime in computer years. It’s banged up and has a crack in the case, but it still powers up and works fine for my purposes (tracking finances for the family). However, it’s got one foot in the grave, and so I’m planning ahead. I’d like to buy a ThinkPad to replace it, so my goal is $600. I’ll give SmartyPig a try if I’m selected for this gift card.
March 25th, 2008 at 1:59 pm
Andrew G, you’re in debt and looking to BUY all that stuff for your pad? Dude, check out craigslist and freecycle for usable duds while you focus energies on paying off your debt. You can’t afford to furnish your place with store-bought things yet!
Side comment to Flexo: The SmartyPig site owner commented here. Can he win his own gift card? Haha!
March 25th, 2008 at 2:13 pm
I want to start saving for a MacBook and this would be a great start.
March 25th, 2008 at 3:00 pm
Hi Flexo! I’m saving for a trip to Italy with my boyfriend.
March 25th, 2008 at 4:00 pm
I’d love to save up for a cruise with my wife. In our nearly four years of marriage, we’ve never been on a trip together!
March 25th, 2008 at 4:59 pm
Not a bad idea—wish there weren’t any fee though. I know that I have been saving up for a down payment on a condo and to pay off student loans . . . the funds are not segregated so there is a tendency to count the entire amount in savings when working out the figures for the purchase price for the condo.
March 25th, 2008 at 5:08 pm
I guess it’s a decent idea, keeping your save-to-spend goal and your saving goal separate. My next major spending (aside from my May trip to Europe) will be the 3G iPhone.
March 25th, 2008 at 5:08 pm
Saving for a new car. I decided to take my current savings and pay off a student loan. Hopefully I can build it back up and a avoid a junker.
March 25th, 2008 at 5:59 pm
Hi! I’m saving up for a honeymoon next year and would like to be entered into your drawing. Thanks!
March 25th, 2008 at 7:04 pm
I was checking out Smartypig yesterday and was strongly considering them for my children’s savings account.
March 25th, 2008 at 11:39 pm
I used to save for a “B” share of Berkshire Hathaway, just so I could attend the annual shareholders meeting and listen to Warren Buffett talk, but I’m pretty sure I missed the deadline. :-/ Now I’m in the process of reinvesting it by reselling Nintendo Wii’s. ;)
March 26th, 2008 at 8:15 am
A nice idea except that the fee scares me.
March 26th, 2008 at 8:43 am
We’re saving our Christmas fund using Smartypig.
I agree the fees are a bit steep, but pretty easy to overcome if you’re diligent. The trick to getting around people being charged for contributing to your savings goals is to just have them register.
March 26th, 2008 at 4:06 pm
I’m saving to replace a fence. Having a 5% bonus to Home Depot would help quite a bit.
March 26th, 2008 at 4:27 pm
Since I often shop at Amazon this can be a good deal to save if I manage to avoid the fees.
March 26th, 2008 at 5:18 pm
I’m saving for a new laptop for my wife and I to replace the sloooow one we have now.
March 26th, 2008 at 5:36 pm
My husband and I are saving to:
1) pay down my student loans that will enter repayment in Febrary 2009.
2) Starting a new down payment fund.
3) Trying to prevent taking out private loans to pay for my husband’s dental school.
4) New car fund. Both of our cars are older than 10 years and have more than 100,000 miles so we’ll have more repairs and eventually a replacement in our future.
Thanks for the review of SmartyPig!
March 26th, 2008 at 5:44 pm
I am saving for a new computer. The old one has been repaired once already and is on it’s last legs.
March 26th, 2008 at 8:10 pm
I love free money, even if there are a few strings attached. My goal would be saving for a house-full of new windows.
March 26th, 2008 at 11:41 pm
Right now, my savings account is piling up toward paying off my credit card debt (which is at 0% APR, or else I wouldn’t be “saving” for it, I’d just be paying it off!). For something like SmartyPig, though, where it’s a purchase… I think I’d be looking at saving for a trip – probably to somewhere in Europe.
March 27th, 2008 at 12:00 am
We’re saving for a full tank of gas. This may help us reach that goal.
March 27th, 2008 at 10:55 am
Interesting concept. If I had $100 seed money, my savings goals would be:
1. Furniture/Needs of our new home (closing May 1st)
2. Helping sister with her wedding (April 09)
3. Build up a proper emergency fund
March 27th, 2008 at 12:13 pm
I have too many savings goals to list! Please pick me :)
March 27th, 2008 at 6:30 pm
Saving for vacation .. pls pick me.
March 28th, 2008 at 12:38 am
I am IN! I have a big list for savings !!! On the top is saving for kids!
March 28th, 2008 at 1:07 am
Saving for a bigger e-fund.
March 28th, 2008 at 7:54 am
I’m about to purchase a new home (and sell my current place) – and the new place is going to require a new fridge and dishwasher… Must save for those appliances, since I’ll be broke once the housing transactions go through!!
March 29th, 2008 at 8:52 pm
I’m going to be moving shortly and I have absolutely no furniture, so I’m saving for a desk and a couch
March 29th, 2008 at 10:34 pm
Flexo, I just found your site after reading about the SF get-together for yourself and some of the other PF bloggers. I recently opened a SmartyPig account and wrote about the experience myself. I’m using it for a christmas fund (remember xmas club books anybody?) and for a specific purchase I plan to make in the future. I’ll more than likely take advantage of the extra 5% from a retailer and thus maximize my return.
Overall, I think SmartyPig will be successful if it is marketed for what it really should be, a way to save for things that you would otherwise be tempted to use a credit card for.
March 30th, 2008 at 10:21 am
I’m currently saving for:
1. a new bike – to replace my 26 yo bike
2. tuition – I work FT and attend school PT
Just found you via GRS – thanks for the chance to win $$$.
March 31st, 2008 at 7:43 am
We’re saving to furnish the nursery. :)
March 31st, 2008 at 11:44 pm
I’m working to save $10,000 to pay for grad school in the fall (Masters and teaching credential) :)
April 1st, 2008 at 7:53 pm
I think the fees are kind of killer and a huge barrier for shared goals, but I like the general idea. I would love to use this to save up for a laptop I plan to get.
April 1st, 2008 at 7:53 pm
I am saving for vacation, Christmas shopping and a new set of tires for my car.
April 1st, 2008 at 9:07 pm
i would love this gift card. I would use it to start a fund that will go towards remodeling my kitchen or bathroom!
April 1st, 2008 at 9:17 pm
My immediate savings goal is to establish a decent emergency fund… somewhere around the $6000 range. I’ve never been too good at this… hence the debt. So far I’ve got about $500.
April 1st, 2008 at 9:18 pm
I’m saving for my emergency fund, an engagement ring, a new (used) car, and retirement.
April 1st, 2008 at 9:26 pm
My boyfriend and I are saving to be able to be able to move him across the country and so we can be together.
April 1st, 2008 at 9:40 pm
I’m saving $3,000 for a vacation to Africa.
April 1st, 2008 at 9:47 pm
Count me in! I’m saving for home improvements!
April 1st, 2008 at 10:42 pm
Hmm, $100. I’ll take it! I’ll honestly probably cash it out and invest it elsewhere but if it’s a contest I’m in it to win it!
April 2nd, 2008 at 8:17 am
This would be a nice head start to saving for a real dining room table, instead of the one I currently have that is falling apart.
April 2nd, 2008 at 9:22 am
My next savings goal is for an addition for our home!
April 2nd, 2008 at 9:28 am
Hi there! I am currently saving up to remodel my small, outdated kitchen. I have a side business as a caterer, so I pretty much live in my kitchen, testing new recipes and cooking with my two little girls. Every catering dollar I make is going towards my “kitchen fund.” I opened a SmartyPig account last month after hearing about it from my sister, and I think it’s a neat idea.
April 2nd, 2008 at 9:39 am
This sounds great! I am saving to fix my poor, broken car. Count me in!
April 2nd, 2008 at 9:49 am
We’re saving to furnish the nursery
April 2nd, 2008 at 10:50 am
I would like to saving for a down payment on a home and build up my emergency fund. Not only have I made some financial mistakes in the past, but I am trying to make up for all of that.
April 2nd, 2008 at 11:48 am
I have several savings goals, but if I won the gift card, the goal would be to save for a car that I can pay for in cash so I can get rid of my car payments.
April 2nd, 2008 at 4:32 pm
I’m saving up for a lap top. Hoping to buy it during my state’s tax free weekend in August.
April 3rd, 2008 at 8:06 am
Doing the “pre-529 eligibility” savings plan. :)
April 3rd, 2008 at 12:51 pm
I have a SmartyPig account, and we are saving for a house downpayment (a seemingly impossible task here in the California Bay Area)!
April 3rd, 2008 at 9:40 pm
Not sure what my goal would be. I’m buying a new car soon, but that wouldn’t work with SmartyPig.
April 4th, 2008 at 4:55 pm
Fund my trip to Japan!
April 5th, 2008 at 3:09 pm
I don’t know if this is still open (I spend Saturdays catching up on all my blog reading! D’oh!), but hey, the vacation/i also need a new laptop funds have no shame ;)
April 6th, 2008 at 3:00 pm
$1,400 dollars for a new laptop (praying that this one doesn’t die before finals) and $800 for next year’s books.
April 8th, 2008 at 3:44 am
I am in the process of saving for a new car! $10K. The 100 gift card would be a great start! I have recently realized how important money is to my life and I need to get things in order.
April 8th, 2008 at 5:32 pm
Will use toward kitchen and bathroom repairs
April 9th, 2008 at 12:59 am
The giveaway is now closed. Thanks!