SmartyPig: Online savings account to help you reach your goals

I've mentioned before that I use SmartyPig for my sinking funds. Since you may be wary of investing in a bank or site that you've never heard of (completely understandable), I thought I'd review and feature some of its advantages and disadvantages.

SmartyPig is a free online service to help people save for specific goals. It's a virtual piggy bank to save for things like a new TV, vacations and weddings. The service currently boasts a 1.00 percent APY. This is quite a bit more than 0.05 percent offered by our local banks. The savings accounts are held in BBVA Compass bank and are FDIC insured up to the maximum allowed by law.

You set up 'goals' within your savings account to start saving toward. There's no limit to the number of goals that can be set. You can opt for automatic transfers from an existing checking or savings account or transfer funds manually whenever you want.

There are three options for withdrawal of funds:

1. ACH transfer to a bank account
2. Debit MasterCard that you can load with funds from your goals (a one-time $9.95 fee applies)
3. Retail gift cards through retail partners like Amazon, Macy's and Barnes & Noble

It is important to remember that your savings goal must be closed before you can withdraw the money. You don't actually have to reach your target amount; the funds can be withdrawn at any time. If you decide you'd still like to save for that goal after withdrawal, just create a new one with the same name.

If one of your savings goals is a Christmas fund, the retail gift card may be a particularly good option. You can get extra cash by loading a card from one of their retail partners. For example, Amazon.com offers an additional three percent; Overstock.com offers an additional six percent.

Goals can be shared with family and friends if they'd like to contribute to your savings. This option is a little strange, in my opinion. It could come in handy for accounts for children if their grandparents or other relatives want to donate to teach them about saving.

SmartyPig is best used for purchasing goals and sinking funds. Sinking funds that I have in my SmartyPig include property taxes, gifts, Christmas and membership fees. We also have a vacation goal. While I have experienced no problems with my withdrawals, I've read some reviews that said their withdrawals took a week or more to process. For straight-up emergency funds that you may need immediately, opt for an account at one of your local banks.

Smartypig offers iPhone and Android apps to help you view your goals anywhere.

Images courtesy of SmartyPig.