SmartyPig: Piggybank 2.0?

Here's a clever site that can help you sock away money for purchases you're hoping to make some day: SmartyPig. You tell it what you're saving for, how much it costs, and when you want to buy it, and it will tell you how much you need to save each month (hard math, that). Then, if you let it, it will automatically deduct that amount from your checking account each month until you make your goal.

It pays interest, too (currently 4.3% APR). Plus it lets other people contribute to your fund--if you like gifts of the monetary kind. There are widgets for social site profile pages. And in a final twist of clever business, once you reach your goal, you get your money in a Mastercard debit card or you can take payout in a gift card. The gift card option will get you an extra bonus, up to 5%, depending on the retailer. SmartyPig buys gift card dollars in bulk, and at a discount, so the company makes additional revenue every time someone wants their money this way.

SmartyPig is not monetary rocket science. It's really an exercise in retail financial packaging. The company works exclusively with Iowa's West Bank (chosen by the founders due to its proximity to their homes and its reputation, I was told). There's nothing wrong with this at all, but SmartyPig is not a service you could plug into your existing Bank of America account if you wanted to.

And there are some odd restrictions: You can't take your money out in cash nor have it transferred to another bank for free. Withdrawing by check costs $25. You can, though, close your account at any time and get the debit card. Co-founders Jon Gaskell and Mike Ferrari told me they are looking at other withdrawal options. But, as Gaskell told me, the symbolism of the gift card or the debit card is important to SmartyPig customers. ""People like the idea of having the goal and sticking to it, and not using SmartyPig like a bank bank." The service makes it easy to save and easy to spend the savings on what you've saved for, but not quite as easy to shovel your savings back into your general checking account. That's by design.

SmartyPig is the weirdest online savings account I've seen, but it appears benign. It brings a disciplined approach to savings to consumers. And if SmartyPig isn't right for you but you think it might be good for someone you know, you can--surprise!--buy the other person a gift card to SmartyPig itself to get them started on the service.

See also Some Notes on SmartyPig in The Simple Dollar. And Leverage: A bank for your gift cards on Webware.com.