Stay Informed!

By Stephanie Halligan on 06/24/2011 @ 11:00 AM

I know it’s only June, but I’m already thinking about December. The season of gift giving and holiday shopping comes around each year and I find myself with empty pockets. If you’d asked me about my Christmas shopping plans in January, I would have told you that I had every intention of saving up enough money to buy lavish gift for my family and friends. Ask me now in June, and I would tell you the same thing.

But as the months creep by, that mythical stash of holiday cash never seems to materialize. Winter sneaks up on me and I’m always left asking myself: “Where did that money go? Better yet, where did my intention to save disappear to?” If only I had had the foresight at the beginning of each year to save just a little bit of money every month, I wouldn’t be in this situation again…

That’s where SmartyPig comes in.

SmartyPig is a unique savings program that was designed to foster goal-oriented savings. Described as an online piggy bank, SmartyPig helps its customers save for specific financial goals like a wedding, a vacation or even an emergency fund, making it easier for customers to visualize the “prize” rather than the process. Like other online savings accounts, SmartyPig deposits are FDIC insured, held in accounts owned by BBVA Compass Bank. Individual financial goals are funded with monthly recurring contributions from an existing checking or savings account. You can also make additional one time contributions to your goals and receive contributions from your friends and family.

SmartyPig is useful for a number of savings goals. For example:

• You and your best friend could share an account to save up for a European vacation next summer.
• You and your wife are expecting your first child and could open up an account to receive contributions from family and friends.
• You could create your own private account to save for next year’s Christmas gifts.

SmartyPig even suggests the amount you should be saving each time you make a deposit. Need $500 for a flight to the West Coast in December? SmartyPig will tell you that if you start saving now, you’ll need to deposit $71.43 each month. Those “bite-size” monthly deposits are a little easier to digest than hundreds of dollars charged to your credit card at the end of the year. Here’s a sample screen shot from a SmartyPig account:

Not only has SmartyPig transformed the way I have personally saved money, it has great applications for the world of applied behavioral economics as well. If you’re running a savings program, such as an Individual Development Account program, SmartyPig can help motivate savings by addressing several key behavioral economics principles:

• Mental Accounting: SmartyPig accounts can be named for specific purchases such as “Downpayment for my first home” or “1st year of Community College,” helping savers visualize their goals. Studies show that people are more likely to save and less likely to “raid” an account if their savings are tied to a specific future expenditure.
• Identify and Affirmation: SmartyPig allows its users to post their goal progress on Facebook and other social media websites. This helps creates public accountability and allows loved ones to cheer on the saver’s progress. Family and friends can both see the progress a saver is making and contribute to the account as well.
• Minimize Hassles: SmartyPig requires a saver to set up a recurring deposit for each goal. Whether depositing $25 or $100, monthly or weekly, recurring deposits help savers to “set it and forget it,” letting their savings steadily accumulate overtime without any continued action required.

SmartyPig and other innovative online banking products have some interesting applications in the matched savings world. On a personal level, this has been a transformative savings account. Needless to say, I’m looking forward to the holidays this year – only 6 more months left to save!

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