simplerich

Earlier today I twittered that I was a fan of SmartyPig. I got two e-mails asking me a) Is it for real with those interest rates and 2) how do I use it? Well a partial answer for how I use it is to show some examples of what I use it for:

SmartyPig is an online bank I use it for saving towards specific goals both necessary and luxury. I think of SmartyPig as a reverse credit card. Instead of putting something on the card and then paying for it. I pay for it in small, manageable payments, and then, when I have enough, I move the money back into my bank-account and go buy the thing I was saving for. Rather than paying the credit card company interest on the thing, I get paid interest while I save for the item. This helps stop me from making impulse purchases, and gives me time to anticipate the purchase and shop around for best place to buy it.

When I first heard of SmartyPig and the really high interest rates (3.05% APY as of 5/27/09) they were offering compared to my other banks I was very skeptical. If it’s too good to be true it probably is was my assumption. I set up a trial account for my car stereo. 286 dollars. Yes. I can afford that as a one time purchase, this was a test of SmartyPig though. How easy was it to set up an account and would they really give me my money back at the end? Well, it was that easy, and yes they did.

SmartyPig is owned by Westbank and my deposits are FDIC insured. I started the account with twenty-five dollars and couldn’t do anything with it until the twenty-five dollars posted from my Wells Fargo account to SmartyPig. Once it was in though (about 3 days), I could adjust the amount of my monthly deposit as well as the total goal I was saving for and the time by which I wanted the goal met. I could raise the goal really high or down to $250 (the minimum goal you an set). I could even close it out and get my money back out and transferred back to my Wells Fargo account if I wanted. They didn’t hold my money or make me leave it in for any length of time. It was still my money, and still accessible by me. I set it at the goal at the cost of the car stereo, set the time for a couple months down the road and watched the money automatically transfer from one bank account into the other. I was notified at every step of the way by e-mail that a transaction was about to take place, and that one HAD taken place. It was very transparent and painless.

Once the goal had been reached it stopped withdrawing money and was willing to just sit there, continuing to acrue interest until I took it out. I opted to have it transfer out to my Wells Fargo account and in two – three days it was in my checking account waiting for me to go get my stereo, which I did.

So, I use it now for all my short term savings goals. My emergency fund is in INGDirect still. In the examples above I pay my insurance annually to not have to think about it or pay any weird fees for splitting up the payments and I’m saving towards a nice birthday present for myself. So, I tell it when I need the money and how much and it figures out how much it will be to get to that goal. Then I forget it. I make sure to set the goal a week before I need the money to allow for bank transfer times and then I just forget about it. It’s similar to bank offered billpay except I’m making interest on the savings.

My other goal is for a Kindle2. I really want one. I’m hoping that between now and when this goal is reached there’s a service pack to allow the Kindle2 to read PDF’s. I don’t want the DX as it’s big and I want small. Big would undo the advantage of the small form factor I’m looking for in the Kindle2.

Oh, a note on public and private savings accounts. These two savings accounts I’m talking about here are two that I’ve made public for examples. You don’t have to make your savings goals public, obviously I don’t make all my banking public, but these two were good examples of uses for SmartyPig.

The How do I use SmartyPig? by Rich Griffith, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 United States License.