If you’re fortunate enough to have some extra cash in the bank, the newest addition to Betterment’s Smart Saver bond-based savings product automates the process of putting that money to work.
Two-Way Sweep, now available to all Betterment Smart Saver customers after a limited rollout last year, is a new evolution of the company’s Smart Deposit feature. While Smart Deposit could look into your checking account and automatically move money into Smart Saver up to a certain threshold, Two-Way Sweep works both ways, putting money back into your checking account when your balance is running low.
By default, Two-Way Sweep will analyze your linked checking account once per day to determine the average cash you need on hand for 21 days worth of expenses (your lower bound) and 35 days of expenses (your upper bound). If your balance is above that upper bound, it’ll automatically withdraw the excess and put it into your Smart Saver account, which currently earns about 2.3% annually, net Betterment’s .25% fee. And if your checking balance falls below the lower bound, Smart Saver will automatically sell bonds and transfer enough cash to bring your balance up to the midpoint of your bounds, a process that takes 4-5 business days.
Betterment promises to continually adjust your 21 and 35 day bounds based on your spending habits, but if you prefer to keep a little more control, you can set the limits manually, and change them any time.
For most of us, we’re talking about a relatively small amount of money here, and a minuscule amount of interest, but doing small things like minimizing cash drag and putting your excess money to work at a young age can pay off big time down the road, once the magic of compounding interest kicks in.