I enjoyed Tom Dziubek’s discussion with Jon Gaskell, the CEO of SmartyPig, in the latest episode of the Consumerism Commentary Podcast. If you have a chance, listen to the part discussion in which they discuss SmartyPig’s interest rates. Tom asked how SmartyPig can continually offer high interest rates. Jon Gaskell intimated that SmartyPig’s restrictions and requirements result in a banking relationship in which customers’ accounts are much less liquid than a typical savings account.
According to the CEO, the average saver using SmartyPig is saving for a goal over four years away (fifty-one months). Customers are generally not withdrawing their money early, so they are “sticky deposits.” SmartyPig therefore offers a savings product that has more in common with certificates of deposit (CDs) than with savings or money market accounts.
Keep this in mind when shopping for banking products. As of today, SmartyPig is offering a 2.75% APY, but if you are going to let your money sit without withdrawals for four years, consider some better priced options like Ally Bank’s 48-month CD, currently offering 3.0% APY.
To be fair, SmartyPig does have an advantage over certificates of deposit. You can (and must, according to SmartyPig’s rules) make additional deposits towards your goal each month. If you consider your goal as a fixed point in the future, each month, you are earning the current interest rate on a decreasing term length. With a certificate of deposit, each monthly contribution would mature one month later than the previous month’s deposit.
Today’s guests in the eleventh episode of the Consumerism Commentary Podcast are Jon Gaskell from SmartyPig and Consumerism Commentary’s newest contributor, Jeff.
SmartyPig is a unique banking application that works closely with West Bank to offer surprisingly high interest rates but presents limitations to its customers. In this interview, Tom Dziubek and SmartyPig founder Jon Gaskell explore SmartyPig’s purpose and the tools offered for goal-oriented savings.
I join Tom to speak with Consumerism Commentary’s newest contributor, Jeff. Jeff writes a weekly column for Consumerism Commentary, appearing usually on Thursdays. You can find Jeff’s articles here and on Jeff’s own blog, StretchyDollar.
To listen, use the player above (Adobe Flash required), download the podcast here, subscribe to the podcast RSS feed, or use the iTunes link. Note: open links in a new window (Ctrl-click or Command-click) to avoid interrupting the podcast.
[00:00] Introduction from Flexo
[00:36] Interview with Jon Gaskell
[01:20] — How SmartyPig helps savers stay goal-oriented
[01:50] — Accounts for children
[02:35] — How SmartyPig makes money
[03:28] — SmartyPig’s interest rates
[06:28] — Red McCombs’ investment into SmartyPig
[06:57] — SmartyPig account opening process
[09:15] — Contributing funds towards a SmartyPig goal
[11:42] — What happens when a saver reaches a goal
[13:58] — What happens if a saver doesn’t reach that goal
[15:04] — Using SmartyPig to help raise funds for charities
[17:55] Interview with new Consumerism Commentary contributor, Jeff
[18:55] — Jeff’s initial interest in personal finance
[19:30] — Why Jeff started writing about personal finance
[20:11] — Jeff’s favorite personal finance advice
[20:40] — Favorite personal finance authors and books
[21:16] — Jeff’s anticipated contributions to Consumerism Commentary
[22:29] End
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