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Savings Advice

Understanding Smart Saver

Learn more about Smart Saver, a solution for your extra cash that’s a low-risk alternative to a low-yield savings account.

Articles by Betterment Editors

By the Editorial Staff
Betterment Resource Center  |  Published: August 17, 2018


What is Smart Saver?

Smart Saver is our low-risk investing solution for your extra cash. This is money that you might have sitting in a checking account or low-yield savings account. It’s always there, rarely used, and is probably losing value due to inflation. In the background, Smart Saver is part of your taxable investing account.

Smart Saver aims to earn income similar to a higher yield savings account; however, rather than putting your money in a bank that returns interest by loaning your money out, Betterment puts your cash in a low-risk portfolio that yields income through bonds.

More specifically, we invest your extra cash in the 100% Bond, 0% Stock Betterment Portfolio Strategy, which consists of:

  • 80% short-term U.S. Treasury bonds (SHV)
  • 20% short-term investment-grade bonds (NEAR)

By combining multiple low-risk assets, we help you seek higher expected returns, while keeping your risk low.

Common Questions about Smart Saver

How do I delete my existing Smart Saver?

If you do not wish to have Smart Saver, you can remove it by selecting Smart Saver from your Menu and then click “Goal settings” towards the middle-right of the page. Here you will find the option that reads “Remove Smart Saver.”

How can I hide Smart Saver if it’s being suggested to me as a goal I should open?

To hide a suggested goal, choose the goal from the menu on the left and then click on “Hide this goal.”

Can I have a Smart Saver in my Joint or Trust account?

At this time, you can only have one Smart Saver within your individual personal account. Smart Saver cannot be used for joint or trust accounts.

How do transactions work with Smart Saver?

Like your other investments at Betterment, you can seamlessly move all or part of your Smart Saver balance into a taxable Betterment goal or initiate a transfer back to your linked bank account at any time.

What does Smart Saver cost?

Betterment has a single management fee that covers all products (including Smart Saver), features, advice provided through the website, trading, etc. Read more about our pricing here.

How do performance and taxes work with Smart Saver?


The returns of the bond funds are determined by both yield and price change. Because there is low price volatility associated with low-risk bond funds (80% SHV and 20% NEAR), performance is primarily driven by yield. In other words, dividends will be the primary source of growth for your Smart Saver.

When first investing in Smart Saver, you may see low or even negative earnings. This is because it takes time for the underlying bonds to pay interest and in the interim, the bond funds may experience slight price volatility. Our Advice and Investing team put together a helpful illustration of this concept, which you can find by clicking here.


Interest you earn from a traditional savings account is considered income and is generally taxed at the same federal, state and local tax rate as the income you earn from employment. With Smart Saver, the dividends you earn are also considered income and are generally taxed in the same way. However, because the majority (80%) of the money in your Smart Saver is invested in short-term U.S. Treasury bonds, the portion of dividends paid from the short-term U.S Treasury bonds is not subject to state and local taxes.

It’s also worth noting that while much of Smart Saver’s yield will come from dividends and be taxed as described above, normal price changes may come into play. If the shares you own in your Smart Saver go up or down in value, when you sell, any sort of realized gains or losses will be factored into your taxes (if held less than a year, at your short-term capital gains tax rate, if held longer than a year, at your long-term rate).

Please note that since Betterment is not a registered tax advisor, we cannot give specific tax advice. For information regarding your individual circumstances, please consult a qualified tax professional.

How does Smart Saver differ from a Safety Net goal?

Smart Saver is a solution that you might tap into on occasion due to regular fluctuations in spending. It’s designed to hold extra money you have lying around, which you’d like to have grow, so you’re not leaving money on the table. This is the money you use when a small appliance randomly breaks or you take a weekend vacation. You should be okay dipping into Smart Saver from time to time.

A Betterment Safety Net goal is the money you save for big emergencies. There’s a set amount you want sitting in it (usually 3-6 months of expenses), that hopefully you’ll never touch. It needs to grow to keep up with inflation and presumably the growth of your income. This is the money you use if there’s a big medical emergency, you lose your job, and/or if there’s a natural disaster. There should be a mental barrier that says, “I only touch this account for true emergencies.”

We encourage you to review our methodology to ensure you fully understand how Smart Saver works.

Get started with Smart Saver by logging in to Betterment.

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