When SmartyPig first came out, I was negative about it. I wrote in March 2008 SmartyPig: A Simpler Way to Save Or a Fee Trap? To recap, SmartyPig works like labeled piggy banks. You first create a goal for what you are saving for. Then you set up automatic monthly transfers from your checking account to your goal account at SmartyPig. Money in your goal account earns a competitive interest rate. You can have multiple active goals at the same time. SmartyPig provides some tools which let you publish and track your progress toward your goals. You can also solicit contributions from your families and friends or even from the general public.
I had two major objections to SmartyPig when I looked at it last time. The first objection was that they charged $5 if you wanted to contribute to someone else’s goal or a family member or friend wanted to contribute to your goal. Think Grandma giving money to grand kids. Or parents giving money to a Little League team. Because the contribution is likely to be under $50, charging $5 seems excessive. SmartyPig quickly changed that. If the contributor also opens a SmartyPig account and uses the linked checking account, a transfer from the checking account to another SmartyPig user’s savings goal is free. That’s great, but the contributor still has to open a SmartyPig account. If Grandma is not saving for some goals herself, Grandma may find it not worthwhile to open a SmartyPig account. If the contributor pays by credit card, SmartyPig charges 2.9%. For a $50 contribution, that’ll be $1.45. While not free, it’s much better than the old $5 price tag. SmartyPig also has to cover its own credit card processing fees too. I still wish SmartyPig accepts checks or sets themselves up as a payee with CheckFree. Then Grandma can simply use her bank’s online bill payment and send $25 to the grandkid.
The second objection I had was that SmartyPig did not allow withdrawal to the linked checking account when the goal is reached. The only way to get the money you saved up in your piggy bank was using a prepaid debit card, a retail gift card, or requesting a check which SmartyPig charged $25 (!). I’m glad to see SmartyPig changed that too. They announced in late July you can transfer the money back to the linked checking account by ACH when your goal is reached or when you close your goal. That’s the way it should be in the first place. Although it still isn’t listed as the first choice, at least the choice is there. ACH transfer isn’t listed as the first choice because SmartyPig doesn’t make money if you do that, whereas SmartyPig makes some money if you use their debit card or buy a gift card. So I understand why they put that option at the bottom. It’s a good compromise between satisfying the users and generating revenue.
Now that SmartyPig addressed my two objections, I say it finally justifies the word Smart in its name. I can see how it can help some people save up their money before they buy something. I hope it becomes successful.