Smartypig is an online savings account where you save towards a specific goal. It’s got about the highest interest rate I’ve seen. Currently it’s 3.05% APY.
I’m curious how they can offer such a good rate.
I just tried to set up an account to try it out, but failed their ID verification questions. Fuckers. I was supposed to get two chances but they only gave me one. Now they’re going to send me a letter to sign.
Anyway, it sounds attractive based on the interest rate, but not very handy as a regular savings account. You have to set a goal and a monthly automatic withdrawal from your bank account, so you can’t go moving money in and out willy nilly. You can get your money anytime you want it, but you have to close your goal, move your money out, then open a new goal and transfer money back. AFAICT, anyway.
The social part is you can let your friends & family know what you’re saving for and if they have a Smartypig account they can contribute to your savings goal (or pay an extra charge if they don’t have a Smartypig account). The downside to that would be that if your friend gives you $10 for your new Wii you’ll probably feel obligated to give her $10 towards her new Xbox. It’d be good for student types who people don’t expect to reciprocate monetarily. There’s a variety of ways to let people in on your goal, like Facebook, Myspace, etc.
I haven’t followed up on this, but in their FAQ, they claim
Someone planning to give them money would do well to investigate.
As for the high rate, it’s not that high, and looking around their site, it looks like they intend to make up the difference via debit card and gift card tie-ins.
I didn’t read all the info, but if your looking for high yield risk free savings, you might want to examine money market accounts that purchase cds (you’ll be able to earn a much higher rate of return). The mere fact that they advertise that the rates are subject to change over time implies that this is a spectacularly low earning money market account.
And the whole idea of publishing bank account information on facebook so that others might donate seems akin to begging. But as always YMMV.
I work for a bank in Australia, who are white-labelling this product (being marketed under SmartyPig from ANZ, but IIRC it’s the same product as from the US). I don’t know a huge amount about it, but would assume that we’ve done our due diligence on this that it’s not a scam.
In Australia, it’s being marketed as a way of encouraging children (from 5-6 up to 18-20) to save (although those under 16 need the account to be opened by their parents). Parents and grandparents (plus other family and friends) can help the child save towards a goal of their choosing, and learn savings skills at the same time. We’re not marketing it as a replacement account for adults - there are other suitable options for them - but if an adult wanted it, they could open one. Just not sure how the social marketing aspect would really work - it seems better placed for kids.