If you’re one to check out high-yield online savings accounts, you’ve probably come across SmartyPig.
Unlike most online savings accounts, SmartyPig is a “goal-centric savings platform,” where, instead of being used just to store money, each account is earmarked for a specific savings goal.
The social component to SmartyPig makes it unique in the space, according to Mike Ferrari, a co-founder of the site. Users sign up for the site, then set goals and attach dollar amounts to them.
“I think it actually incentivizes people to do things better,” says Jon Gaskell, co-founder.
“It’s very goal-centric,” he says. “There’s a required monthly contribution until your goal has been met.”
To contribute money, it’s free if you use your own funding. If you’re adding money via a credit card, there’s a 2.74% processing fee.
Thirty-percent of all goals are public, according to Gaskell, with users able to show either the total or percentage saved. “We have a lot of people that obviously enjoy that feature,” he says.
Users can receive contributions from their friends and family toward their goal, but it’s not the main reasons people make goals public. Instead, it’s moral support and accountability.
“People want to be held accountable. They really like that,” says Gaskell.
So what are people saving for?
The top four categories for the site’s users, Ferrari says, are:
- saving to save
- travel
- emergency fund
- home improvement
Who is SmartyPig?
For a relatively new savings account with an above-average interest rate, it’s only human to wonder who’s behind SmartyPig. The site deposits funds with West Bank, an FDIC-insured mid-western bank.
They’re able to offer such a high interest rate, according to Gaskell, by calculating their users’ average goals and matching that with the best available offer from West Bank.
The average SmartyPig user has a 51-month goal, and thanks to a 42-month CD offered by West Bank, they can offer the high APY.
Like all online financial services, security is one of the most important factors for SmartyPig. “It is the most critical aspect of our business,” says Ferrari.
The Internet has revolutionized how users interact with financial institutions, and SmartyPig is no different. They’re constantly Twittering, even holding contests and giving out money.
“The accessibility of people at a financial institution is a rarity at many banks these days,” says Ferrari. “I think [being accessible is] one of the pieces our customers really like.”
Different Uses for a Different Service
While most high-yield online savings accounts tend to act the same — as storage for short-term savings — SmartyPig is being used differently be different people.
“It’s amazing to see how people are using it,” says Ferrari.
He recently got a call from a soldier in Iraq who created a SmartyPig goal to save for a plane ticket to get home when his tour is up. He placed a savings widget on his blog, which shows the percentage to his goal that updates all the time.
People are contributing to the goal, and his kids watch the widget to see when he’ll be able to come home.
And the SmartyPig blog recently featured a story about a man using the service to raise money to build a church in his community.
Taking Positive Action with Your Finances
When users reach their goals, they have the option to transfer it to another bank account, or redeem it for a retail gift card (if they’re saving for a big-screen TV, for example).
They can even get an additional 6% cash boost by getting a gift card from Overstock.com, one of SmartyPig’s partners.
SmartyPig recently launched a mobile site, and already they’re seeing positive action. A recent Tweet by a user describers how he went to Starbucks, decided not to buy anything, and then transferred the money he would have spent into his account using his iPhone.
