I Want What I Want and I Want it Now

American’s want what they want and they want it now. It is hard to be shocked by any statistics when “trillion is the new billion”, but here are a few regarding American’s inability to save:

- American’s have amassed $10.5 trillion in mortgages and $2.6 trillion in consumer debt.
- During Q3 2005, American’s spent nearly 1% more than they earned.

Clearly, compound interest and the satisfaction of saving are not enough to entice Americans. On the other hand, American’s spent $92.3 billion on legalized gambling during 2007 while only saving $57.4 billion.

With these insights in mind, Harvard Business School professor Peter Tufano has devised a program called “Save to Win”. The idea is to encourage savings by pairing slightly lower than market interest rates with the chance to win lottery-style prizes. Currently, the program is being tested in eight credit unions across Michigan.

Put $25 into a “special one-year CD” and qualify to win prizes of up to $400 per month or up to $100,000 in an annual jackpot. In the first 25 weeks, the program has attracted $3.1 million in new deposits.

If this concept takes off as it appears that it will, banks could have a new “option-like” product to market to customers, with varying interest rates, payout options and duration based on risk tolerance.

Tags: Encourage Saving, Save to Win