Savings - is it a thing of the past, or can it be the new rage with consumers? Particularly young adults, the millenials. How can you be an influence?
Christopher Morris Suggests Developing New Ideas
Christopher Morris, CUDE and Web Manager for CUNA Councils recently responded to an email on the DE (development educator) listserv about this very issue of savings.
His comments started off noting that the savings rate in 2006 was -1%, the lowest since the Great Depression. And, young adults are part of that negative trend. They are not saving as much as they should, but instead are simply spending and borrowing more.
Morris noted that 61% of young adults cited “lifestyle purchases” as an impediment to savings. University administrators state that they lose more students to credit card debt than to academic failure. And all the while, millennials are the most socially conscious consumers to date.
The question asked and being studied is, “How can credit unions appeal to young adults to save money in a way that is meaningful, fun, exciting and rewarding?”
Christopher’s 30 Under 30 group is working on an idea of offering prize-based savings for young adults with a charitable spin.
Could Prize-Based Savings Be the Answer?
Prize-based savings accounts with prizes and messaging tailored to young adults. Everybody wins! Prizes for the young adults are tuition assistance, free food for a month, iPods, etc. A prize of a similar dollar amount is given to a local charity of the young adult’s choice (selected when they first open the account).
Studies have found the prize-based incentives can be compelling, particularly for young adults. The approach described above is simply a win-win-win savings opportunity. The charities of choice win, the members win (they get prizes and they get to help their favorite charities) and the credit union wins (they see member and deposit growth).
Other DE’s have chimed in with prize based savings programs they have initiated and implemented and the results have been very good.
It’s a lot to think about, but deposit growth is a must if you are going to be around in the future.
Comments? Thoughts?
UPDATE: Chris is also continuing this conversation over at the YES CU Blog, which talks about issues CUs face when serving members in the 18-to-30s range. Stop by and give them a look. We hope this sparks some more great discussion on this topic.
4 comments so far
1 Credit Union Warrior // Aug 1, 2008 at 12:08 pm
Your post starts with information that, I think, is partially responsible for this situation. The national savings rate does not account for 401-K type retirement. To me, omitting $3 trillion in savings is misleading at best. The biggest problem, however, is the perception fudged figures like that give off.
Here’s my beef: we are giving too many people an excuse NOT to save. What we’re doing is saying, “no one else is saving”. Worse, many folks are saying “no matter how much you save, it won’t be enough”. Want proof of that? Just go to any website that helps you calculate how much you need to save to afford college or retirement.
Consumers have been led to believe savings is both impossible and hopeless. To compound matters, there is a prevailing mindset (well founded) that no matter how big of a financial rut you have dug yourself into, there are government plans in place to bail you out.
We need to change the conversation.
Don’t say “EMERGENCY! EMERGENCY! National savings rate is negative!” Instead, how about saying “Pssst…if you can learn how to save, look at all the great things you’re going to be able to experience both now and in the future.” Better yet, why don’t we tell people they CAN save, and that Credit Unions are here to help guide and reward you through the process?
Christopher’s program is doing that. He’s saying, “Look at all the great things that will happen when you save! You’ll have money, and you’ll be helping a great cause!” That’s powerful. MUCH more powerful than the prevailing wisdom of the day that leads people to feel more hopeless than hopeful.
2 Christopher Morris // Aug 4, 2008 at 2:11 pm
Thanks for the nod on your blog - I appreciate it (also I have to give a shot out to my fellow group members Megan Armstrong, Brie McCarthy, & Alex Alexandar - also Filene gets a hat-tip for facilitating).
Our idea was inspired by i3’s initial work on the prized-based savings idea after hearing Peter Tufano speak about it at our Chicago meeting (with all the 30 under 30 members). We then put an even more positive spin on it by adding the other layers.
I can go on and on about the product, but I won’t (look for the finished business plan coming soon…) I love the idea because it appeals to so many different types of people (savers, low-income non-savers, socially responsibe folks, etc) and am happy to see the original prized-based savings idea gaining traction (see here).
Also, I saw the following in yesterday’s paper, which directly relates to this post:
Humberto Cruz: Government should promote thrift
The piece talks about a recent report on savings and notes:
The public sector has its own “anti-thrift institution,” the report argues: state-owned and operated lotteries. The report recommends “repurposing the state lottery to include a savings ticket feature.” (At the same place where you buy a lottery ticket, you could buy an “every ticket wins” savings ticket redeemable for a higher amount in the future).
Interesting….
3 Ben Hendrix // Aug 4, 2008 at 5:31 pm
I believe there is another side to that argument as well. With young adults being more web savvy and trusting, many of those who are saving have discovered online direct savings banks. These sites, who are FDIC insured, offer a significantly higher savings rate than most credit unions. How will credit unions combat these sites to capture the saving share that is out there?
4 Denny DeGroote // Aug 5, 2008 at 9:07 am
Wow! Good comments gentlemen. Saving certainly is a topic worth talking about. No easy answers on how to stimulate consumer saving, but it sure would be interesting to keep the conversation going.
Christopher highlighted a Humberto Cruz article - it’s a good read. Gets you thinking - about the length and breadth of the whole issue.
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