Travel Product Review: SmartyPig savings accounts

I like to talk about banking if you haven’t noticed.  Due to the economic climate we live in I decided it was finally time to create an actual emergency fund instead of raiding my Roth.  I started looking at the Fat Wallet forums at their high interest liquid savings accounts and found a bank called SmartyPig.  They offer accounts where you create a goal such as an emergency fund, christmas fund, vacation, etc.  Money can automatically ACH from an external account to Smarty Pig until it fulfills the goal.  A Smarty Pig account accrues fairly good interest, and when needed the money can be withdrawn.  Withdrawal is an all-or-nothing thing so you either close out the goal or you don’t.  It’s really not that big of a deal since you can transfer money to a new goal.

So how is this travel related?  Well, not everyone is as lucky as us business travelers and you don’t always get millions of frequent flyer miles without spending any personal money.  That means when you take a vacation you are spending your own money.  Enter Smarty Pig.  You can set up a goal for a $5000 vacation or whatever value you choose and put money towards it every month.  Then, and this is the main reason why I am posting about this account over a generic account out there, you have the ability to close the goal and get a bonus by redeeming for certain giftcards.  Right now the list includes American Airlines offering a 3% bonus if you redeem for their gift card.  Marriott offers 5%, then there are also generic Travelocity cards with varying %ages for different values.  You can choose to apply funds to multiple cards (they have many restaurant options if you’re into that), or just transfer it back to your bank.   I believe the ability to ACH back to your bank wasn’t initially available and many older negative reviews point that out.  ACHing money from SmartyPig to your linked bank is indeed an option according to the website.

So, automatic savings + 1.35%APY (compounded quarterly which sucks, but still a decent rate) + bonuses for certain program gift cards.

I would recommend if you anticipate the vacation costing $5000 that you set your goal at $5000, that way any interest and potential bonus from redeeming for a gift card instead of cash is icing on the cake.  If you anticipate an American Airline ticket costing $890, then you see Delta for only $670 for many people it doesn’t make sense to pay that premium.  Participating companies could also change at any time and there is a potential that American or Marriott may not still participate by the time you are ready to book your vacation.

You can also post about all this on Facebook.  For a vacation fund or honeymoon fund or something maybe you like that.  I haven’t personally done that since my emergency fund should be mine and mine alone.

Overall I like the all-or-nothing nature of this.  I don’t want to dip into an emergency fund for something I don’t need.  Although this is a liquid account, it is still tied up enough for me to leave it alone.