This week we review Yotta Savings and answer whether their approach of gamifying personal savings makes them a savings account you should have on your radar.
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Disclosure
This post contains either affiliate links or referral codes. If you chose to follow the links, or use the provided code, and sign up for the service, I may earn a small commission at no additional cost to you. Tools and services are evaluated relative to the value they can bring to your financial journey, and the existence or lack of an affiliate program does not impact the services/tools I chose to highlight. The opinions expressed below are my own.
Experts commonly present having three to eight months’ worth of expenses in a savings account as a foundational step towards financial responsibility. Knowing that you have easy access to cover an emergency can reduce the stress in our daily lives. If you are a member of this group congratulations! In general savings around the world are in a dire state. Households are more likely to have no savings than they are to have even one thousand dollars saved. Despite this, half of those in the US will play the lottery with an average annual contribution nearing that same number.
The reality is putting money into a traditional savings account can be boring. With interest payouts nearing zero percent the allure of a big win, even if it is very remote, is greater than ever, and can often override what is sensible. Yotta Savings looks to solve this issue by leveraging our infatuation with the lottery to encourage personal savings.
If you use code EBSEATJ8 at signup you will receive 100 extra tickets in the next lottery drawing!
Table of Contents
What is Yotta Savings? How does Yotta Savings Work?
Yotta Savings (Yotta) attempts to incentivize personal savings by combining a minimum guaranteed rate of interest (currently.2%) with the excitement and earning potential of a lottery system. For every $25 you deposit into your savings account (up to $25,000 total) you will receive an entry into that week’s lottery. For contributions above *$10,000 you will receive an additional entry for every $125. Each entry is a ticket consisting of seven numbers. Every evening, the system draws a number and, at the end of each week, you receive an additional payout for each matching number. The payout you receive each week is in accordance with the numbers that match any/all of your tickets per the current prize pool.
*In April of 21 Yotta reduced the tickets you receive per dollar starting at $10,000. Previously this threshold was $25,000. In theory, this reduces the over all ticket count and slightly increased the odds for those who have a balance below $10k.
Yotta is looking to build upon a successful program implemented in the 1950’s in the United Kingdom, where the government introduced Premium Bonds. This program, which also used a lottery system in lieu of interest payments, was largely successful inspiring one-third of the population to contribute. Various entities have started similar programs in other countries, including several in the US, throughout the years to varying success.
Encouraging Kids or Family Members to Save:
Yotta supports joint account as well as gift cards which you can provide to your kids, family members, or friends to encourage them to save.
How Much Can I Win with Yotta?
The prize pool has remained very consistent since their inception. Prizes range from ten cents for matching only the Sunday bonus number, to a Tesla Model 3 for matching all six numbers outside of the bonus number, to the grand prize of ten million dollars for matching all six numbers plus the bonus number. Prizes up to the $1000 will be rewarded in their full amount to any ticket which hits, while prizes above $1000 will be split among all matching tickets.
Is Yotta Savings a Legitimate Savings Account? Is My Money Safe With Yotta?
Evolve Bank and Trust, a FDIC insured bank established in 1925, secures money placed into a Yotta Savings account. This insurance applies up to the FDIC limit of $250,000 and extends to your account through pass-through FDIC insurance.
What are the Tax Implications of Having a Yotta Savings Account?
Most individuals are used to the tax implications of interest earned on a standard savings account. Your bank may provide you a 1099-INT form that you file at tax time.
Yotta’s accounts reward you in two ways, a standard interest rate that would fall under a 1099-INT, and prize winnings. These prize-winnings fall under a second tax form, a 1099-MISC covering miscellaneous income.
Both forms are taxed as ordinary income and determined by your tax bracket. While this introduces an additional tax form, Yotta’s decision to pay out via a prize award will not increase your tax burden outside of the higher amount of return your savings now generates.
Tax Reporting: Yotta Interest and Prize Winnings
If you are lucky enough to win over $600 in a year, Yotta will provide you with a 1099-misc to report with your tax return. For most of us, they will not provide a 1099-misc form, and the responsibility will fall to us to self-report. I had some difficulty determining the federal tax id to file. I would suggest you reach out to Yotta support directly, but in 2020 they provided me the id of 35-2675262.
Is the Lottery Legitimate and Can I Actually Win the Million?
While no one has yet won the grand prize, on Feb 5th, Yotta announced that an account holder in California had become the first to win a Tesla Model 3. As with any lottery, your odds of winning the large prizes are low, but unlike a lottery ticket, even when you do not win, you are building up your personal savings!
A third-party insurance company has been contracted to draw the numbers and issue the payouts with Yotta playing no role. Yotta and has already purchased the insurance against the payouts, removing their incentive to impact the results.
Should You Join Yotta Pool?
Yotta recently launched the concept of ‘Pools’ where you can team up with friends and family to average your payouts. Each week you can choose to allocate a number of your tickets to the pool. They pay the winnings from this combined inventory of tickets out in proportion to the percentage of overall tickets you contributed that week.
A similar concept has been a staple in workplaces for decades with lottery pools. From a mathematical perspective, joining a pool is the rational decision. Your payouts will be more consistent and likely will be slightly higher over time. I still found it a tough decision, as it also curves your luck on the high-end. If I’m alone and get luck with a $1000 ticket, I outperformed expected earnings on my savings account for an entire year. In a pool, we would have to get lucky many times over.
Reviewing My Time In a Yotta Savings Pool
I ultimately joined a pool and my first three months have provided an APY of 1.78%. The experience has mirrored my expectations going in. My payout from week to week is more consistent than before I joined a pool. My total over three months is in line with my five months earning before I joined the pool, but those first five months included a lucky $11 win. With average luck I still expect the pool will provide slightly higher returns over the long term, but the promise of a luck win is part of the allure. With such a low difference, I plan to drop out of the pool and enjoy the small chance that any week could be special.
Joining a Yotta Saving’s pool is the rational thing to do. For the average person, over a long enough time horizon, your return should be slightly higher in a Yotta pool than on your own. Part of the genius of Yotta Savings is the possibility of a big win to help motivate us to save or just to have something to look forward to each week. For me, it’s worth the small difference in long-term reward just to have a little fun. If you have the mindset to simply set up your savings and let it grow, joining a savings pool offers just a bit more consistency towards your goal.
What is a Yotta Crypto Bucket?
Starting in late 2021, Yotta began to allow its users to hold part of their savings in stablecoin. This new offering provides a low overhead option for users to leverage the power of Crypto markets to earn additional interest on their accounts.
Holdings within a crypto bucket are invested in USDC – a stable coin pegged to the US Dollar. USDC is meant to have low volatility but is not a risk-free asset on the level of cash.
The Upside of Yotta Crypto Buckets
With a Yotta Crypto bucket, your account will continue to earn a base rate of .2% APY. This APY is about 3.5 times the national average for a savings account. Additionally, you earn an entry into the weekly lottery for every $10 you contribute up to $25,000. This is two a half times the rate of their traditional savings account. This rate should bring the APY on most accounts to around 4%.
The Downside of Yotta Crypto Buckets
The portion of your account you move into a crypto bucket is no longer insured by the FDIC. While lack of insurance is a reality of moving from a savings account to an investment account, it is an important change to consider.
The FDIC is considering the merits of offering pass-through insurance on stablecoin holdings. The availability of pass-through insurance would reduce one of the largest concerns of a crypto bucket account, but any decision is likely to be a way off.
Yotta continues to partner with well-known exchanges and its stablecoin holdings are 100 percent collateralized.
Should You Invest a Yotta Crypto Bucket?
The opportunity to receive a four percent annual yield on a savings account is appealing. The problem is that a Crypto Bucket account is no longer a saving account.
While stablecoin is designed to be pegged to the dollar and display low volatility, it is not without risk.
Shifting your account introduces a level of removal from being a savings account towards an investment account.
We already prefer Yotta as a secondary savings account, suggesting that your emergency savings remain at a more accessible bank. Crypto Buckets are best suited for additional funds above and beyond your emergency savings.
Yotta Crypto Bucket Tax Considerations
Since Yotta does performs all activities relating to the underlying assets and not the account holder, opting into Yotta Crytpo Bucket does not introduce additional tax complications. Yotta factored this in when setting the average payout on these accounts, so these costs are being passed on to you, just as lower yields and not as taxable events.
Prize winnings would continue to be taxed as miscellaneous income as with Yotta’s standard savings account.
Review- Is Yotta’s Crypto Bucket a Good Opportunity?
For those who already have an emergency fund securely at another bank, does Yotta’s Crypto Bucket offer a valuable opportunity for additional savings? Well… yes and no.
For investors, those comfortable holding stable coin on their own, Yotta’s offering likely falls short. Investors can find better rates for holding stablecoins on other platforms. The value of Yotta’s new offering is in making the higher yields that cryptocurrency and Defi platforms make possible available to everyone. Many individuals do not have the knowledge or comfort level to purchase and store stablecoin. Yotta now makes it easy for everyone to benefit from the higher yield without the overhead. Yotta’s value continues to be what it always has been in encouraging the everyman into the fold. Their mission of inclusion should be commended.
The Elephant in the Room- Regulation
The federal government continues to look toward regulating the cryptocurrency market. Platforms which over interest for holding coins are being investigated, and required to register through SEC. PoolTogether, a platform with some similarities to Yotta, is currently facing a class action lawsuit.
We don’t know what the impact will ultimately be for the crypto market or Yotta’s latest offering. In the short term, lower yields of even volatility in the value of USDC is possible.
Why You Should Have a Savings Account With Yotta Bank:
With the insanity that was 2020, many formally High-Yield savings accounts have dropped their interest rate near zero, making the cash millions of Americans depend on slowly depreciate in value. Yotta offers a base interest rate of .2% which is around four times the current national average. The lottery aspect provides a reasonable expectation of somewhere between a 1.7 and 2% yield with possible upside.
Are There Any Hidden Fees with Yotta Savings:
As of this review there are no fees connected to a Yotta Savings account.
What is the Min Balance Required to Maintain a Yotta Savings Account?
As of this review there is no minimum balance or associated fees with a Yotta Savings account.
What Limits Does Yotta Savings Place on Deposits or Withdraws? Can I Get my Money out of Yotta?
Transfers into and out of Yotta savings are easy. They can be performed at any time but do adhere to the following industry standards:
Deposits:
- $10k daily limit
- $40k monthly limit
Withdraws:
- 6 per month
- $10k daily limit
- $40k monthly limit
- Your money will hit your external bank in 1-3 days
How to Create a Yotta Savings Account
Everything, from account creation to linking to an existing bank to fund it, is supported via a mobile app. This app is available on both the google play store as well as the apple app store.
If you use this signup link and/or enter the code EBSEATJ8 during sign up you will be rewarded with 100 extra lottery tickets (the equivalent of what a balance of $2500 would get you) for the first week’s lottery. If you do use the code comment down below and let us know what you won for that initial week!
When setting up your account, you will be asked to provide some basic information:
- Name
- Address
- Birthdate
As well as the more sensitive ask of your social security number. This is standard and a necessary step in creating a savings account. You will then be able to link your account to an external bank to fund the account. The industry standard Plaid interface is leveraged to securely connect to your bank. All information is passed utilizing industry standard 256 bit encryption. Yotta follows industry standards throughout this process.
Remember to use code EBSEATJ8 to receive 100 extra lottery tickets for the first week!
Am I eligible for a Yotta Savings Account?
Lottery payouts tied to Yotta are available to any legal resident of the US 18 years of age or older. You must have a checking account at another bank in order to transfer money into/out of your Yotta account.
Will Creating a Yotta Savings Account Impact my Credit?
A hard credit pull is not required when creating a savings account. One will not be performed against your credit.
What if I Don’t See my Bank Listed?
If your bank cannot be found on Plaid, you can still connect to it manually by providing the routing information. Yotta will require a couple of micro deposits (think in cents here) and your verification of the transactions. Once again Yotta is following industry best practices to protect your money.
Yotta Savings Review – Why You Should Not Use Yotta
Yotta is not a full-fledged bank. You will not find a local location or have a checking account provided by them. Withdrawing your money involves first transferring it to another bank which would tack on 1-3 days until you have access.
These limitations are not unique and contribute to allowing Yotta to pay a higher effective yield. Always keep some money at a bank you can directly access in case of emergencies.
Yotta Savings Review – How Much I Have Earned
I have maintained a savings account with Yotta for just under five months. Below is a month by month rundown of my results to date:
Month 1- = 1.922% Month 2- 2.25% Month 3- 1.98% Month 4- 1.11% Month 5 – 1.52%
My first five months with Yotta bank mostly aligned with my expectations. I went in expecting around a 1.7% annual yield with some fluctuation because of the prize components. I have typically won the lower prizes each week with several tickets resulting in 10-25 cent wins each, but have occasionally hit three matches and a Yotta ball, resulting in a $7 win from a single ticket.
My earnings have been over $40 in five months. The same amount of time with an account paying the national average would have paid me just over a dollar.
What if You Forget to Pick Your Numbers?
If you are unable to select your numbers for the drawing, the system will randomly fill each ticket for you.
Do the Auto pick Numbers Under Perform?
I alternate weeks between selecting my own numbers and allowing the system to pick for me. My results have always been in line with expectations. Allowing the system to pick your numbers shows no negative impact upon your chances to win.
Final Review – Is Yotta Savings Worth Your Time?
As a final review of Yotta Savings, I am fairly impressed by what Yotta Savings has to offer. In today’s environment, a 1.7% yield keeps your emergency fund ahead of inflation. My experience to date has slightly exceeded these expectations, and I have to admit to finding some small entertainment in watching the nightly number draw and seeing how many of my tickets matched.
I also admire the creativity (though they certainly took inspiration from earlier projects) in identifying a universal need and trying to address the psychology behind it. The concept of gamifying experiences has become such a constant in our daily lives and proven so successful, why not turn to it to incentify such a need as personal savings?
If interest rates stay low, and they burn their investment capital to grow their user base, Yotta may be forced to change their payouts, but I hope they will attempt to remain competitive. I will continue to monitor, but for now, I remain a client and will consider them when I look over the Best Savings Accounts for 2021.
I hope this review of Yotta Savings was helpful! If you do chose to open an account – Sign up at Yotta and use code EBSEATJ8 to receive 100 free tickets in the next lottery!