I’m looking for a new place to put my money. After years of being an industry leader in savings rates, FNBO has fallen back with the rest of the pack and while I certainly don’t expect 4% right now, I do expect a rate leader to remain a leader. There are banks offering 2% with no minimum balance, compare that to FNBO’s 1.5%. Then there is Smarty Pig, at an enticing 2.75%. So what’s the catch?
Smarty Pig isn’t exactly a bank. You can’t deposit and withdraw money at will. Instead it is like a savings club, similar to a Christmas club, but for any purpose. You decide a goal and how much you want to set aside each month to reach it, Smarty Pig will then automatically withdraw that amount each month from your existing checking or savings account. The money in your Smarty Pig account is FDIC insured up to the normal limits and will earn you 2.75% (current rate may change), much higher than the rate you can earn elsewhere. They don’t charge any fees for this service. The minimum goal is $250 and you have to deposit $25 to start. So what else makes SP different?
The point of Smarty Pig is to get you off the debt cycle and in to saving money. They make it easy to add money to your account, but not so easy to withdraw it. You can’t make partial withdrawals, you either wait until your goal is reached or you must close it down to take your money out. On the other hand you can add money at any time and make your goals public so friends and family can contribute. The concept is great if you are saving for a simple, concrete goal like buying a new car or going on a vacation, but I’m not sure it is right for me.
I like the flexibility of a savings account. I often juggle goals and change my mind about what is important. But most of all, I save money for the sake of saving money. I can see myself setting up a SP goal, only to need the money for something else a few months down the road. I think the Smarty Pig program works best for someone new to saving and who needs to learn how. That person isn’t me, but I am trying to find a goal that fits with SP’s mission. The 2.75% is just too tempting.
UPDATE: Smarty Pig has dropped their rate to 2%, not much of an advantage over other banks. You can get 2% or better in Everbank's MMA without the many restrictions.
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3 comments:
Maybe you could start with something small, like paying off your Care Credit balance from D's most recent adventure. While not insubstantial, it's a small enough amount that you will to be able to pay it off within the year anyway. This way you not only don't have to pay interest on the account, but you can actually earn some. By starting small, you have a chance to try it out and if you decide that it's not working, you could temporarily transfer the money from another savings account to Smarty Pig long enough to get your money out without having to seriously derail any other plans.
You could always break up your desired savings goal into smaller pieces, that way, you can minimize the impact of being 'trapped' in a smarty pig account. So, if you want to save up $3000 for an emergency fund, you could break it into six $500 accounts, and add money to them one at a time until you meet your goal.
And keep in mind, you don't necessarily have to come up with a a goal that fits the SP mission; the category is just for your own use, at least with a private account.
I've been looking at them, too. I think I may use them for my concrete goals - like a new stove. The gift card option where they add value when you cash out might make it worthwhile for those types of goals.
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