Piggy BankWith interest rates so low these days, it's hard to get motivated about putting money into a savings account. But it is important for us to save, and so services have popped up that use other methods to encourage us. Two in particular -- SaveUp and SmartyPig -- turn the act of saving or paying down debt into a game: Play enough, and you can get sweet deals on gift cards or win a new iPad.

The idea is simple. Register and track at least one account; deposits and debt payments are then used to calculate bonuses for earning rewards.

While neither service explicitly says so in its marketing materials, the very idea of offering prizes for responsible money management suggests that the old saw "Savings is its own reward" is out of date. Today's low interest rates certainly would tend to make one think so.

Get Paid to Play

At SaveUp, points and plays are awarded daily. Participants can enter drawings or try randomized games. As of this writing, roughly 900 "winners" have received cash or some other prize.

Granted, some of the prizes are small. But as one winner said of the $5 she won recently, she's now "motivated to play every day."

When's the last time you heard someone so motivated by the prospect of earning $0.50 or less per year for every $100 deposited in a local bank account? Chances are, never.





When Not to Play

There are too many better alternatives, especially if you're carrying any amount of debt, and that includes mortgage debt.

According to Bankrate (RATE), the average 30-year mortgage costs roughly 3.5% annually. By contrast, the average five-year certificate of deposit pays just 1.48% while the average "low rate" credit card charges 10.95%.

Paying off debt is the easiest and most effective way to build your cash stash.

Get Social and Broadcast Your Goals

And if you don't have credit card debt or a mortgage? SmartyPig is at least as effective as SaveUp when it comes to earning more. Deposit money for an identified savings goal, such as "take a Hawaiian vacation," and set a target dollar amount. Kick in money regularly and watch funds accrue at a higher than average interest rate -- 1% as of this writing.




Yet there's more to SmartyPig than above-average interest. The site also allows users to broadcast their savings goals over Facebook (FB), Twitter, and other social media in order to solicit support from friends and family. Pre-built website widgets also allow visitors to make instant contributions.

Finally, there are the bonuses. SmartyPig has exchange deals with several retailers whereby exchanging funds earns extra cash deposited onto a gift card. Say your savings goal was $700 for a new flat-screen TV. Cash in those funds for a Best Buy (BBY) gift card and you'll earn 2% more, or $714. Cash in at Amazon.com (AMZN) and you'll earn 3%, or $721 total. Either way, it's a win.

The Final Verdict

To be fair, savings alternatives can be hit-or-miss. The owner of a Pittsburgh area ice cream and coffee shop drew criticism from state regulators for setting up a community bank that pays out interest in the form of gift cards. Cold cash beats cold ice cream, in this case.

And what of negative consequences? SaveUp looks like a smart idea, but what if players are banking on prizes for a bailout? Sure, that seems unlikely given the site's incentive model, but there's a reason the old saw was the old saw. In the end, savings -- and the savings habit -- really is its own reward.



Motley Fool contributor Tim Beyers did not own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and past columns. The Motley Fool owns shares of Amazon.com, Best Buy, and Facebook. Motley Fool newsletter services have recommended buying shares of Facebook and Amazon.com.


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amanda jones

Why don't you just invest in no-load mutual funds? Check out Troweprice.com.

September 21 2012 at 12:03 PM Report abuse rate up rate down Reply