Reader Alison shares a unique savings account program for residents of Ohio. The SaveNOW program is a higher interest savings account supported by the state in order to encourage savings. The maximum balance on this account is $5,000 and pays 3.25% APY. The fine print regarding deposit limits is a bit confusing. It says:
Limits single deposits to $500 at a time with the exception of lump sum payments such as; a tax return, insurance settlement or inheritance payment
If I read this to mean that each resident to deposit a maximum of $500, every other year, then it would take nearly 20 years to reach the maximum? Otherwise, you might overpay taxes to max out the benefit. In any case, this is not going to make anyone rich, but can be a nice incentive given the program’s goals. A couple could deposit $1,000 every other year up to $10,000 combined.
Does anyone know of similar programs for other states?
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Where does it say “$500 per year”? It says “at a time”. 1 deposit a day and in two weeks it is maxed out. Maybe even 10 separate deposits within one day may work.
Exactly, then why not 10 $500 deposits in 1 minute? What’s the point? It’s a curious wording.
The second question in the FAQ…
Q. What are the requirements for a SaveNOW account?
A. Savers must be Ohio residents and can only participate once every other year
Way to click-through…
And the 3.x percent is good for a single year only; after that, the bank assigns their own interest rate. After reading the FAQ, it seems that you can only deposit $500 at a time, up to $5000, and earn 3.25% on it, ALL in a single year only. After that year, the interest rate changes, and you can freely withdraw the money. You have to wait another year until you can do it all again.
When I signed up my account, they told me I could deposit $500 once a day. So yes, over two weeks, I should be able to hit the maximum balance. The money then sits there for a year. After 12 months the state takes the year’s daily average balance and applies the 3.25% to that amount. In month 13, I get a check for the savings incentive and my account reverts to the bank’s normal savings rate. In month 24 I can go back to the bank, open a new account and do the program again.
This program is intended to build financial literacy and good saving habits among folks who usually don’t bank (the program includes educational newsletters and periodic surveys, etc). So I imagine the $500/day cap is to keep savvy financial people from “taking advantage” of the system. Also, I think the program assumes that its target users will contribute and withdraw from the savings account over the year so that the daily average balance actually will be much lower than $5,000.
I just talked to one of the participating banks. They said it’s common for people opening the accounts to write 10 checks for $500 each when they sign up, each dated a different day. I might give it a try since there’s one near me.