New Year’s Resolutions often include some promise to start saving money. Easier said than done. The average American age 40 or under says there’s nearly a 50% chance they would not be able come up with $2,000 next month if there were an emergency, according to CNN Money. This in turn causes family stress that that replacing the A/C, or a trip to the emergency room would finically devastate the household. This is why many companies and banks are providing services to help individuals create and stick with a savings plan.
Walmart, in cooperation with Green Dot, announced the launch of “Prize Savings,” a prize-linked savings incentive program available to the millions of Walmart MoneyCard holders. Maryland has established a program called Maryland Cash. They partner with a variety of both public and private organizations to help working families establish financial security. Save To Win, and SaveUp, are two examples of programs offered by banks and credit unions to provide meaningful incentives for customers and members to increase their savings, through what is referred to as “prize-linked savings”. The American Savings Promotion Act allows banks and thrifts to establish prize-linked accounts in any state that approves these programs. The winnings and rules vary, but most programs raffle off cash and prizes to individuals who contribute to a savings account. The programs are designed to help participants develop a regular saving habit. This gives people a safety net. So when the inevitable bumps in the road do come along, it’s not a catastrophe. And these programs seem to work.
In a pilot program conducted by Filene Research and fourteen credit unions, the savings reward program achieved a 3% adoption rate among credit union members, with nearly 250 members winning prizes for reaching specified goals during the pilot, including several $1,000 winners. And in a post-pilot survey of participants, 61% believe their credit union really wants to help them succeed in a fun way; 41% have a better opinion of their credit union; and 95% believe that their credit union is interested in their financial health and progress. Not surprisingly, the largest group of users was between the ages of 25 – 34.
What’s in it for the credit union?
Two benefits: awareness, and access to user behavior. In the pilot study 39.5% of respondents indicated that the program made them more aware or much more aware of their credit unions’ products and services. While awareness isn’t the same as new business, the former can drive the latter. Likewise, being able to track user behavior can help drive more targeted marketing to reach younger members.
Credit unions exist for their members’ financial well-being. In that spirit, motivating members to make smart financial moves like saving money, paying down debt, and learning more about managing their money is a perfect place for credit unions to extend services to members, especially younger members.