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SmartyPig Review

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SmartyPigNot too long ago, when SmartyPig first debuted, I complained about how high SmartyPig’s fees were. I wasn’t the only one and shortly thereafter, they dropped many of those fees and restructured their program a bit. I think it’s a testament to their openness to feedback and willingness to adapt to their customer’s needs.

So what exactly is SmartyPig? It’s a website that helps you save towards your goals, giving you a high yield interest rate (currently 2.01% APY) and the ability to have family and friends help you save towards your goal. When you’ve achieved it, you can access it by having it transferred back to your bank, converted to a debit card, or converted to a retail gift card.

How SmartyPig Works

One of the big benefits of ING Direct was how easy it is to open new accounts for various savings goals. SmartyPig is setup with that same goal in mind, making it easy for you to setup savings goals. The difference is they add a social element, other people such as your friends and family members can contribute to your goals as well (if they fund a contribution with a credit card there is a 2.9% fee, I suspect this is to cover the credit card processing costs).

You can set a savings goal for anywhere from $250 to $250,000 and your minimum deposit has to be greater than $25 to start your goal. Then, each month, you must contribute at least $10 and your savings earn interest (currently 2.01%). Then, once you reach your savings goal, the monthly contributions stop and you can decide what you want to do from there. You can continue to contribute, convert it to a gift card from one of their partners, or have it transfered back into your bank account (for free, this was one of the fees they dropped!).

Gift Card Conversion

Besides the 2.01% interest rate and the ability to send money around, probably the biggest value-add of SmartyPig is in gift card conversions. You can convert your savings into a gift card or voucher to one of their partners with a percentage bonus.

For example, let’s say you decided to save money for a couch. When you’ve reached your goal, you have several options. You can simply transfer the funds back into your bank account or you could convert it into a Macy’s gift card. If you decide to convert it into a Macy’s gift card, you get your goal amount plus 12%. Macy’s is by far the most generous but there are other vendors such as Barnes & Noble (5%), Bed Bath & Beyond (4%), iTunes (2%), The Home Depot (3%), and more.

This can significantly boost your savings’ interest rate.

FDIC Insured

Your money at SmartyPig is FDIC insured up to $250,000 as the funds are held at West Bank, which is itself a 115-year-old subsidiary of West Bancorporation (WTBA). Anytime you are looking at a bank, and SmartyPig is essentially a bank account, you need to ensure that your money is protected in some way by FDIC or NCUA insurance.

The final question, after you understand how it works and that your principal is protected, is whether getting 2.01% APY and a potential secondary pop if you convert to a gift card is worth the hassle. I’m discounting the social aspect of SmartyPig, where friends and family can contribute towards your goal, but everything else makes me think that it’s only worth it if you have a large goal in mind and can benefit from the gift card bonus.

I do like the idea of people savings towards their goals with a service like SmartyPig, rather than borrowing via store financing or a credit card. I think with the recession, a lot of people are reverting back to novel ideas like saving up for something. :)

If you have personal experience with SmartyPig, please share them with in the comments below. I’m especially interested in any headaches or issues you may have experienced, I’ve learned that they seem pretty receptive to that and hopefully we can get any headaches resolved. If you have a great experience, please share those as well!

{ 76 comments, please add your thoughts now! }

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76 Responses to “SmartyPig Review”

  1. Chris says:

    An interesting twist on an old idea…

    • The Bub says:

      I did the math, if you put $300 a month into a 2% interest bank and NEVER touched it, at 10 years you will have $149,406.99!!! If you put the $300 a month under your mattress it would only be $36,000. You would need to pay taxes of course but pay that with your non-savings money. Just so you know the monthly interest at this point would be $2929.55. That could be a nice retirement fund.

      P.S. 20 years would look like this $1,757,797.65 in the bank. $34,466.62 a month interest. Under the mattress would only be $72,000!!!

      • RMP says:

        Uh, that would be great if the account paid 2% interest MONTHLY. At 2% annual interest, you would have about $40,000. That is $4,000 in interest over 10 years, not $113,407! Interest is good, but not that good!!!

        • WitchyD says:

          I, too, was going to say that the math is wrong. You must divide your APR by 12 to get the monthly rate. At 2%, it would be .1667. $300 monthly for 10 years at 2% is $39,817. For 20 years it would be $88,443.

          • WitchyD says:

            By the way, you would have to deposit $3,392 a month at 2% to have $1,000,000 at the end of 20 years.

      • aMathTchr says:

        Are you sure that all your math is correct?

        If you put $36,000 in the bank with 2% interest rate annually, at the end of the 10th year you would have balance of about $43,000, because
        36000(1+0.02)^10 = 36000*1.02^10 = 36000*1.22( roughly) = 43000
        Therefore, if you put $300 a month in a 2% interest rate bank and never touched it, you would get more than $36,000 for sure, but not more than $43,000.
        What do you think?

  2. NateUVM says:

    This looks like a GREAT idea! Certainly not for everyone, given the lack of liquidity… I haven’t taken a look at it yet, but the first thing that comes to mind is saving for Christmas/Birthday gifts. Thanks for the heads-up on this one!

  3. Martha says:

    Its like a layaway plan but better structured since you earn interest while you are saving away toward your goal! :)

  4. I’m glad you are putting more emphasis on the gift card conversion than the mooching for money from your friends and family as a value add for SmartyPig. I found that aspect so off putting I never gave it another look. I’m not sure gift card conversion is worth the hassle of moving my money over there and I’m not interested in chasing slightly higher interest rates so I’ll probably stay put. At the same time, I salute their inventiveness in trying to come up with a product that they hope will make them stand out in the crowd.

  5. echidnina says:

    That’s pretty interesting… Do you have to turn the whole amount into a gift card or could you put some towards a GC and some back to your bank account? I can’t imagine what someone would do with a $250 Itunes GC…

    • Chris says:

      I questioned this also. It looks like you are now able to split up your distribution to your liking.

    • NateUVM says:

      You don’t have to buy a gift card. You can just transfer the savings back to your bank account. You don’t even have to wait until you’ve reached your goal, even. The only thing about reaching your goal is that is when the automatic contributions stop. That’s it. You can cash out before, at, or beyond your goal. You earn the 2.01 (or whatever rate it is at the time) throughout.

      The benefit of cashing out with a gift card is the bonus the retailer gives you. But you don’t HAVE to go that route.

  6. Ron says:

    Great concept! I’ve used it in the past just to catch the higher interest rate but I can beat that now with rewards checking. One issue I did have with SmartyPig is they don’t let you list a beneficiary. I called them and they explained it away with some legalese stuff leaving me confused about if my wife would have to partition the courts to retrieve the savings if something ever happened to me.

  7. Wilma says:

    Sounds like it’s on the order of a Christmas club but with the end result a gift card instead of a check. Nice idea and inventive. Probably won’t do it though. =)

    • Chris says:

      Since you can split up your distributions you can get a little extra Christmas money through the gift card bonuses also.

  8. jsbrendog says:

    i do like the 2.01 apy…maybe i’ll use this to convince myself to save for something nice

  9. Joey says:

    I started using SmartyPig a few months back and absolutely LOVE it. I’ve made a number of my friends join. I thought the whole social networking aspect was kind of weird at first, but it’s kind of fun to try and ‘outsave’ your friends.

    Also you’re able to transfer the entire amount back to your home bank account if you need at any time, so it doesn’t have to go into a gift card, though the whole gift card thing was great come christmas time.

    All in all, I’d highly recommend SmartyPig to anyone looking for a fun, easy way to save!

  10. zapeta says:

    I like the giftcard bonus idea. If you were planning on making a major purchase at one of those retailers anyway, you might as well get a bonus after you’ve met your goal.

  11. With family able to kick in, this sounds like a cyber adaptation of Korean soo-soo accounts (which I’m sure I misspelled!). The main difference being with the soo-soo is that it’s a communal affair where the money can be used by anyone in the family who has a need.

    Nothing in the world is really new it seems, it just wears a different face.

  12. lostAnnfound says:

    Thanks for this review. It sounds like a great way to save for something big (vacation, home improvement, etc).

  13. Doug M says:

    Is there a minimum time you need to have an account open before cashing out with a gift card?

    12% at Macy’s seems pretty generous. Maybe generous enough to warrant simply depositing, I dunno, $500, and immediately turn that into a $560 Macy’s card.

  14. Izalot says:

    Pretty cool. Reminds me of what reviewer put down: “like a layaway plan”.Can you purchase several gift cards at one time?

  15. Jessica says:

    We use SmartyPig and have been really, really happy with them.

    It takes a few days to transfer the cash back to the bank, but that is even better than my linked savings account because we aren’t tempted to just borrow a little from this and a little from that account.

    We’ve used it to save up for things like annual auto repair costs, our daughter’s adoption finalization, vacations and other things.

    I’ve never even used it to buy a gift card and I’m thrilled with it. I also love that it automatically does the transfer from my primary account into the SP account.

    I set a goal–how much by when, and it does the calculation of how much to withdraw. Then I just put that amount in my budget each month and SmartyPig takes care of the red tape.

    This is also great for fundraising–like kids’ college savings (until such time that it’s enough to roll into a higher-yield acct) and adoption savings, which often friends and family want to pitch in on.

  16. BrianC says:

    I’ve never even heard of this, but it just doesn’t sound compelling enough to sign up. I would find it so much easier just to save with an ING account.

  17. Nice round up of SmartyPig—we recently signed up and are using it to save up for Christmas 2010 :) Since we usually make a big Amazon purchase anyway, the 4% bonus is going to be great!

  18. Nonnie says:

    Be careful on your 1099 forms if you have more than one account at Smarty Pig–we have two accounts. Interest on the first was $500; interest on the second should have been $800 but they combined the two amounts and reported interest on the second account at $1300 instead of $800. I must say they were extremely quick to fix it once it was pointed out

  19. Hap says:

    Beware of smartypig.com! Lawyers can compound a tragedy.

    There is no right of survivorship on smartypig.com co-owner accounts. This is crazy. People do die. Accidents happen. Customers need to be able to give a co-owner the right to receive the money from our account in the event of our death or incapacity.

    Who can afford to put any substantial sum of money into a smartypig.com account without right of survivorship? If the worst happens, whatever money you have will go to pay a lawyer to get your money out of smartypig.com while smartypig.com hangs on to your money for months or years. Guess that makes the people who established smartypig.com the really smart pigs.

    Other online banks like Discover Bank allow beneficiaries and true joint accounts. What’s Smartypig’s excuse for not being responsive to the needs of its clients? From what I have read on their blog and elsewhere on the internet people have been asking this question for more than a year with no movement toward a positive resolution by Smartypig and its owner West Bank.

    • Jaime says:

      I just verified this. I called West Bank and they don’t currently have a way to add beneficiaries. Too bad, :-( . I’m going to FNBO Direct to open an Interest checking account instead.

    • Wendy says:

      From smartypig’s FAQ page: 13. Can I add a Payable on Death (POD) Beneficiary to my SmartyPig profile?

      Yes, you may add a Payable on Death (POD) Beneficiary to your SmartyPig profile. Only one (1) U.S. Citizen over eighteen (18) years of age is eligible to be a beneficiary on a payable on death account. You may add a POD Beneficiary during the registration process, or by going to the “Edit Profile” page in your SmartyPig profile.

  20. Jon says:

    How does smartypig make money?

  21. Robert says:

    Do you have to have automatic deposits or can you have your bank send checks to deposit in the accounts. I save based on percentages of the money I bring home. This number varies and I would like the freedom of sending the amount I want when I want. I am just really in it for the good interest rate not the help saving.

    • Nick says:

      Each goal has a minimum automatic deposit of $10/month. The amount is calculated according to the size of the goal, the completion date, and the current interest being earned (so “save 1200 in 1 year” would be approx $100/mo, less 2% interest earned).

      In addition to the automatic deposits, you can also add more money manually through the smartypig site, but you can’t push money from your bank directly because smartypig accounts/goals do not have the required account number to do that. I wish they did…

      • Nick says:

        To clarify on the auto deposit calculation, if the interest rate changes then your auto amount will still remain the same until you go in and change the goal’s settings, at which point it’d recalculate the deposit according to the new rate.

  22. Rick says:

    I currently have over 20K in my savings account with ING direct.. The APY is now at 1.10 and SmartyPig is near 2%.. I’m not charged anything by ING direct and would it be the same if I created an account with SmartyPig and transfer money like I do back and forth from my checking account with no charges also?

  23. Bryant says:

    This is perfect! I don’t really WANT too much liquidity as i’m saving for a new home. I don’t want to have too much access to it. Great idea! I’ll look into it more….Thanks Jim!

  24. Liz says:

    I attempted to open a Smartypig account but for some reason failed their test to confirm my identity. Now they want me to fill out some paper and mail it back.

    If I cant do it all online, its too much of a hassle. I’ll find another savings vehicle.

  25. Chuckles says:

    Since after reaching your savings goal automatic contributions stop and interest continues to accrue, if you want to be able to have as much liquidity as possible you should set your savings goal very close to your initial deposit.


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