SmartyPig is for people who want to save for specific goals. […] Just tell us what you’re saving for, how much you want to save and when you want to reach your goal, and we’ll suggest an automatic monthly deposit you’ll make from your existing checking or saving account until you reach your goal.
An interesting and probably very helpful concept. It’s got a higher interest rate (3.9% APY at the time of writing) than my ING Direct Orange Savings account which just—understandably—dropped from 3.0% APY to 2.75% APY.
The downside: you won’t be earning as much interest as you would if you kept all your savings together. However, the fact that others can contribute to your goals and that you’re looking at “goals” as opposed to account numbers are probably significant benefits.
Of course, it’s FDIC insured.
I’m highly against anyone even having any money in a savings account if you have significant credit card debt. Its basically kind of pointless. Use the savings to pay down your credit cards immediately. Bang. Now you are getting 20% for your money, not 2.75%.
But what if there is an emergency? Guess what, paying 20% IS an emergency. Pay it and stay within budget. Then if you have a true emergency, then your credit card will have sufficient limit to cover it.
It’s true, there’s absolutely no way having money in a savings account can help you get out of debt faster.
As mentioned in Get Rich Slowly’s 10 Unconventional Money Saving Tips, “pay yourself first” concept is really just to get yourself to start saving:
Of course, that’s says nothing about getting out of debt, but it can hold true as well. Get your spending as low as possible, pay off your debt first (because you are saving yourself a shit-ton of interest), and then you’ll be in a better position to save.
That said, for one who has difficulties making sure there’s cash (or even credit) available for a big purchase you have to (not want to) make in the future, a service like SmartyPig and it’s goal-driven savings might actually help you manage your finances, although not get the most bang for your buck (at least while you’re still in debt).
Definitely best to leave the saving for last though.