Using Smarty Pig To Pay For College

SmartyPig is a goal-based online savings account that allows individuals to pay for major purchases, such as flat screen televisions, computers and new cars. You can use the service to save for just about anything, even college.

Before suggesting how you might save for college using SmartyPig, it’s important to note that there are some significant disclaimers attached to using SmartyPig as a savings vehicle for college. There are a number of tax advantaged types of accounts such as 529 college savings plans and educational savings accounts. These allow you to put money away for college tax free. You should definitely max out your tax advantaged savings for college before using any sort of online savings accounts to save for college.

In 529 and ESA plans, individuals typically invest in a mix of mutual funds and bonds for college. With the recent volatility in the stock and bond markets, it’s probably a good idea to have some percentage of your college savings in a cash or cash equivalent investment. Having some amount of money in a FDIC insured in a high-yield savings account is probably a good idea as a supplemental college savings plans. This will help make sure that you have some amount of college savings that you can make use of if the market takes a dive.

If you do put some money into an online savings account such as SmartyPig for college, you’re going to want to get the best interest rate available. Currently, SmartyPig is offering a 2.01% APY on their savings, which is significantly higher than what most online savings accounts are offering. ING Direct is currently offering 1.30% APY and FNBO Direct is currently offering 1.40%. The rate that SmartyPig is offering is just about the best available rate on the market.

SmartyPig does not function like a typical online savings account though. It’s a psychology-based goal savings account that helps you meet a specific goal. Fortunately, saving for college is a situation where SmartyPig soars. First, you determine what your goal is. How much do you want to have in cash savings to pay for the portion of college that’s going to come from an online savings account. Then you enter in when your child is going to go to college.

Let’s say that you want to have $10,000 saved over the next 10 years when your 8 year old child turns 18 and is ready for college. SmartyPig’s savings calculator would tell you that you need to save around $80.00 per month to meet that goal. SmartyPig will then assist you in developing a monthly automatic savings account to make sure you actually put away the money that you would like to so that you can save for college.

Friends and Family Members can also contribute to your savings plan as a gift. If you can’t think of anything that your child needs for a birthday or Christmas, you can ask friends and family members to make a contribution to your child’s college savings plan. All you have to do is provide them a link that SmartyPig provides you then they can transfer in funds via Credit Card or ACH electronic Transfer.

SmartyPig is an excellent way to serve as a supplemental savings for college. It shouldn’t be your primary savings vehicle, but could be a great way to pay for textbooks or other expenses during college