Review: SmartyPig

Sure, it's widely reported that pigs are highly intelligent animals, but unless they're also savvy financial advisers (scientific study pending), it's unclear how exactly they're going to help you with your personal finances. Luckily for you, the website SmartyPig®, a clever play on piggy banks, has your back.

How's it work?

SmartyPig is elegantly simple. They've realized that most people don't like to save money for the sake of it, people do so to achieve different goals. Instead of creating a plain vanilla savings account with a generic name like "Day-to-Day Savings", you get to create any number of savings accounts named after your goals. I don't know about you, but "Putting the 'Fun' in Fund" blows "Day-to-Day Savings" out of the water. Whether you're saving for a well deserved vacation, your education or a rainy day¹, you get to customize the account to suit your goals.

If you complete a goal, kudos to you. You get a congratulatory message and can close that goal, which sends money back to the bank account you used to fund the goal². You can also leave your money there and accrue and compound interest as usual with a "100%+ Goal Completed" to remind you how awesome you are. If you need your money before you've completed your goal, you can still close the goal, enjoy the bitter taste of failure, and withdraw your funds with any interest you've accrued. Right now, it probably sounds like a regular savings account that you get to name for a specific purpose. Not that exciting. There is a catch though.

If you decide to withdraw your funds at any point, you must withdraw all of them. By doing this, SmartyPig protects you from yourself. Here's a quick example: Say you want to buy a new pair of shoes, but don't have any money in your checking account. You can transfer some money from your boring savings account scot-free. I mean, how much will that impact your "day-to-day" life anyways. However, say you've been saving to take a trip to Paris for a few months so you can hang out with those people I posted about above. You should be more reluctant to close that goal and transfer all of those funds to your checking account just to buy a pair of new kicks.

Nifty idea. Is that it though?

Nope. That's just the tip of the iceberg. Since people are more reluctant to withdraw from their savings goals until after they've finished them, SmartyPig can offer you higher interest rates. Why this is the case is a little complicated, and I may explore it in more depth in a future post. The basic idea though is that when banks³ have deposits for longer periods of time, there's more they can do with those deposits.

SmartyPig offers a 1.00% Annual Percentage Yield as of 8/15/13 on accounts of $25 and up, which is the minimum. To give you an idea of how good that is comparatively, it's better than most medium-term (12 months or less) Certificate of Deposit⁴ rates, savings accounts and of course checking accounts.

Here's a quick rundown for people who only want to read the bare minimum:

Pros:

• 1.00% Annual Percentage Yield. Better than most checking and savings accounts and medium-term certificates of deposit.
• Funds have Federal Deposit Insurance. This means the US government will back your deposits if the bank where your funds are deposited goes insolvent.
• Goals can be personalized and set up to help you achieve them. Because "Forget the club – I'd Rather Count a Million Bucks Savings Fund"⁵ is way more exciting than "Ultimate Savings".
• Interest accrues daily so you can see how much you're earning. This may sound like the tiniest of perks, but it's surprisingly motivating to see your funds grow on a daily basis, even if by only a little bit.
• You can set up your goals to take public contributions. Don't think you can afford that vacation yourself? Share your goal with friends and family to have them help pitch in.
• Redeem your goal for a gift card at select retailers and you can get an additional bonus. This is a great strategy for big purchases. Say you're saving up for a new wardrobe from Banana Republic. If you save $200 in your goal, you'll get $220 (a 10% bonus!) in gift cards to spend there.
• Sign up for a Cash Rewards Debit Card for 1% cash back. SmartyPig offers a Cash Rewards Debit Card that you can load from your SmartyPig account. Get 1% back on all purchases that you can deposit back onto your card or into a goal. This is great for people who need some extra encouragement to save.
• If you refer a friend and they set up an account and deposit money, you get $10. Only relevant if you're super popular, something I don't really have to worry about.

The cons are few and far between. Most of them are specific to the great features that SmartyPig has, but I wish were implemented differently in some small way.

Cons:

• Referral system done by e-mail and money you can make from it is capped. You're only allowed to invite people by e-mail and you get a hundred invites. If you use all your invites and all your friends sign up for accounts and deposit money you'd make a whopping $1000! However, the odds of all your friends following through like that are pretty low. If a friend ignores an invite, you can't get it back. However, a PR representative for the company informed me that they will be adding the ability to share unique links with your friends for referrals in the future. This is definitely something to look forward to.
• Cash Rewards Debit Card has a $9.95 initial fee, $1.95 domestic ATM fee etc. Even if you incur no additional fees, you'd have to spend $995 until you make back your initial fee. Here's a link detailing all the fees associated with the card. Personally I think there are better alternatives.

Conclusion:
SmartyPig has a long list of pros and few cons. If you're in the market for a high-yielding savings account that helps you achieve your financial goals, I'd highly recommend signing up. Better yet, help me out and let me refer you. E-mail me at cuttingedgepersonalfinance |at| gmail.com or direct message me on Twitter (@CuttingEdgePF) with your e-mail address for an invite. I'll do my best to refer you within 24 hours. For your convenience, the eligibility requirements have been placed at the bottom of this post.

Because of its various merits, SmartyPig will earn the highest, and only, of Cutting Edge Personal Finance accolades: a green, cartoony thumbs up. I'd take a few minutes out of your busy day if I were you to revel in its splendor.

---

1. Those Parisians were hella prepared for that rainy day. We should strive to be more like them, you know, financially speaking.

2. Or other fun things. Keep reading to find out what they are.

3. Although you may think SmartyPig handles your deposits themselves, any funds you have on SmartyPig are deposited with a bank they've partnered with, BBVA Compass.

4. Also known as CDs. I'll explain what these are in the future if people are interested. The takeaway here is that for most CDs, you cannot access the funds you deposit until specific dates. Some CD issuers let you access the funds early, but if you do access them early you are penalized (bankspeak for "charged a fee" or "loss of accrued interest"). Not only does SmartyPig not penalize you for withdrawing whenever you do, you get a better rate of return on your savings.

5. For those of you who didn't get the reference here's a Cutting Edge CliffsNote.

Eligibility for SmartyPig Accounts: In order to establish a SmartyPig account, you must be a U.S citizen or U.S. permanent resident alien with a green card and social security number and U.S. residence address. If you are under the age of 18, please have your parent or legal guardian open a SmartyPig account first. Once the account has been created, your parent or legal guardian will be able to add you as a Limited Access User and give you view-only access to the account.