The airwaves today are filled with news about world-wide deteriorating financial condition: declining stock portfolios, decimation of retirement accounts, record post-war unemployment projections, failure of iconic national companies and massive government spending packages to curtail the damage. Even before this financial crisis exploded, the US consumer (the driving force behind the latest global economic expansion) was feeding this fire with record borrowings and virtually no savings plans. Ironically, now that times seem to be at their worst, Americans are beginning to save again. The recent revival of American’s wish to save meshes neatly with the goals of SimplySave. This idea highlights various aspects of Behavioral Economics to leverage the quirks of the typical saver’s lack of discipline. SimplySave three different strategies to enhance savings:
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- Opt-in or opt-out features at account implementation. There has been a great deal of research to indicate that when given the choice, consumers will often forego savings plans in order to receive short term gratification. Automatically opting members into a savings program may help them overcome that potentially risky behavior.
- Automatic, periodic incremental savings contributions. Based on a “save more tomorrow” concept, savings are incrementally increased over time. This way, the member is not forced to make large savings deposits out of the gate. By gradually increasing them over time, the sacrifice will be less noticeable to the member.
- High barrier to exit. To make a savings plan successful for a longer period of time, consider a high barrier to exit concept. By placing a barrier between the member and their savings, there is less chance for them to spend their savings on a whim.