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SmartyPig creates online savings plan to reach a goal

By Adam Belz, Special for USA TODAY
(Original Article HERE)

WEST DES MOINES, Iowa – A 2008 start-up called SmartyPig has combined social networking and banking to offer a new way to save, and in four years has helped people reach almost $3 billion in savings goals.

Think pig: Social Money President Scott McCormack promotes social-banking system SmartyPig.

  • Photos by Maxine Park,, USA TODAY

Think pig: Social Money President Scott McCormack promotes social-banking system SmartyPig.

The business was created by Des Moines natives Michael Ferrari and Jon Gaskell in 2008 as a high-tech way to encourage people to save for specific goals. Ferrari came up with the idea when his first son was born and he needed to save money for his son’s college education.

He wanted to save for other goals in a program similar to the college 529 plan, and SmartyPig was born.

The program creates an online savings account for goal-directed purchases that can range from travel to consumer goods to a down payment on a house. Money can be transferred automatically from account holders’ savings or checking account at their regular banks. Account holders can then use Facebook, Twitter and other social media to allow friends and family members to contribute to the goal. The deposits are FDIC insured.

Once the goal is reached, the saver can choose from a selection of merchant-provided discounts when making the purchase.

The idea caught on. By the end of 2009, it carried deposits of $212 million.

“They actually sort of jump-started the whole goal-based savings account thing,” said Stessa Cohen, a financial services analyst for Gartner in Philadelphia. “A lot of banks in the U.S. and Canada are looking at providing that.”

Social Money, the company behind SmartyPig, thinks banks are far enough behind, and eager enough to connect with customers on social media, that they’ll pay someone else to do it for them.

Every Monday for six weeks, USA TODAY will look at how fast-growing companies rely on innovation to thrive.

The company is now starting to sell the SmartyPig concept to banks, with the idea of letting them brand it themselves. That product was rolled out this spring. More than 115 financial institutions have approached Social Money about its GoalSaver program, Gaskell said, and the bank has already signed on ICICI, the second-largest bank in India by assets.

Social Money expects to announce new bank customers throughout the year, Gaskell said.

“We’ve basically taken the heart and soul of what we’ve learned at SmartyPig and pointed it at the scale,” said Gaskell.

Gaskell won’t say what Social Money makes each year, but he said the company has been operating on its own revenue for three years. In April, Social Money announced it would hire 35 new employees, bringing its total workforce to 50.

SmartyPig was part of a shift toward savings and personal financial management during the recession, Cohen said. People were ready to save money, when they may not have been three years earlier.

Like Kiva, the online microfinance organization launched a couple of years earlier, SmartyPig also tracks your progress for all to see.

“You can see how far along you are,” said Nathan Robertson, 26, who’s saving for a three-month trip to South America later this year. “It’s a little bit more fun than just a regular bank account.”

By Maxine Park, USA TODAYSocial Money co-founders Mike Ferrari (left) and Jon Gaskell.

Robertson said it’s easier to save with SmartyPig because he doesn’t see the money. It’s automatically deducted, and unlike with a separate savings account at a bank, he doesn’t see it all the time and isn’t tempted to pull a couple of hundred dollars out. He also shares his progress with friends occasionally, though he doesn’t expect anyone to contribute.

“I’ll throw it on my Twitter page every now and then,” he said. “The idea is to share that with your family and friends, and keep up the social pressure to reach your goals.”

Banks might want their own version of it, Cohen said, because it gets them into social media, a world that’s been difficult for financial institutions.

Instead of just tweeting about their earnings or their latest charitable giving using Social Money, banks can get connected to consumers via Twitter and Facebook.

“They’re collecting a lot of information that I give voluntarily,” Cohen said. “I give a lot of information to Social Money about what I’m doing.”

Banks can track their customers better and offer financial products to them when it makes sense for the customer. They can also make deals with merchants based on what consumers are saving for, and tailor advertising to them.

“This attracts non-banks who want to partner with Social Money, who say ‘We want to know what people are saving for,’ ” Cohen said.

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(ORIGINAL ARTICLE HERE)

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Wiping Out $90,000 in Student Loans in 7 Months

Wiping Out $90,000 in Student Loans in 7 Months

By Josh Mitchell | The Wall Street Journal – Fri, May 18, 2012 3:42 PM
(See article here)

Economists are increasingly worried that many young Americans will spend coming years buried under student debt. Joe Mihalic was determined not to be one of them.

Faced with $90,000 in student debt from his days at Harvard Business School, Mihalic vowed last August to eliminate every penny by this summer. He did — three months early.

Courtesy: Joe Mihalic

The 29-year-old from Austin, Texas, is now becoming an Internet celebrity of sorts as financial advisers and young Americans link to his blog, NoMoreHarvardDebt.com, which had 180,000 hits as of Thursday morning. His story is touching a nerve at a time when young Americans are more indebted than ever.

So how did he cut through $90,000 in seven months? It helps to have a low-six-figure salary, as Mihalic does working for Dell Inc. But he also recommends getting roommates, a second job (in his case, landscaping), forgoing all restaurant dining (even McDonald’s), selling all unnecessary items around the house — and getting a flask.

Mihalic said he spent months taking a flask of liquor to bars so he could continue to go out drinking with friends without running up a tab. (Be warned: this is typically illegal.) Instead of the movies, he took dates out hiking, or for bagels and coffee. He ate protein bars packed from home and walked several miles to the city, to save a few bucks on transportation, during a trip to Michigan. He got two roommates to rent out his house.

Mihalic also took steps that financial advisers typically say are a no-no: He liquidated his individual retirement account, drawing a tax penalty, and stopped contributing to his 401(k), even though his employer offers a matching contribution.

“My mentality was I want to be done with these student loans as quick as possible,” Mr. Mihalic says in a phone interview, adding: “It was an emotional decision.”

He made his last student-debt payment six weeks ago. He said he saved roughly $40,000 in interest that he would have paid had he stayed on the 15-year schedule for repayment of his loans.

He says he learned other lessons, too.

“The flask thing, it’s kind of demeaning,” he says. “The funny thing is that girls weren’t really sketched out by it…They did laugh, and I could still get their phone number. It taught me a lot — you don’t have to be this flashy dude, buying drinks.”

(This article originally appeared in the Wall Street Journal  – Fri, May 18, 2012)