In today’s unpredictable economic climate, many people are looking for guidance on how to help consumers build savings. But let’s be honest, money matters can feel daunting, even embarrassing. Sometimes you might not even know where to start. But don’t worry – in this blog post, we’re going to break down how to help consumers build savings in simple, actionable ways.
Saving money is a cornerstone of financial stability, but it’s a challenge for many. That’s where you come in. By offering innovative solutions and providing practical advice, you can help people make saving a regular part of their lives.
Understanding the Savings Landscape
Before we discuss how to help consumers build savings, it’s important to understand the financial realities people face. According to the Consumer Financial Protection Bureau, there’s a strong connection between a person’s financial well-being and their savings account balance. However, a 2021 study revealed that 39% of Americans have less than three months of emergency expenses saved.
This means a significant number of people are one unexpected bill away from financial hardship. And it’s not just about big emergencies either. The Federal Reserve Bank of New York’s Household Debt and Credit Report states that total household debt climbed to $17.29 trillion by Q3 of 2023.
This increase is primarily driven by mortgages and student loans. These financial pressures can make saving feel impossible, highlighting why practical tips and strategies are crucial.
The Impact of Financial Shocks
Unexpected life events, like job loss or a major medical expense, can derail even the most well-planned budgets. When individuals lack adequate savings, these financial shocks force them to rely on high-interest credit cards or loans. This further strains their finances and can lead to long-term debt.
For example, imagine someone loses their job unexpectedly and has minimal savings. Faced with ongoing bills, they might have to charge expenses, quickly accumulating high-interest debt. Without savings, it’s like weathering a storm with a leaky umbrella; damage is inevitable.
This example emphasizes the importance of encouraging proactive saving. Simply telling someone to “just save more” isn’t helpful if they feel like there’s nothing left to save. Let’s explore some accessible and achievable saving solutions, even when money seems tight.
Practical Ways to Help Consumers Build Savings
These strategies cater to various situations. Whether someone is living paycheck to paycheck or has a comfortable income, there’s a strategy for everyone.
1. Make Savings Automatic
Automating savings removes willpower from the equation. Online banking features can encourage automatic savings. Using automated savings tools, customers can set up a rule to automatically transfer money into savings.
For example, when a $1,000 deposit hits, $100 transfers to their savings. Some of these savings tools also have online bill pay to help members avoid late fees. Customers choose the frequency and amount of each transfer, building a consistent saving habit effortlessly.
This is effective because life gets busy, and people forget to save. Automated savings eliminate that risk, like a robot butler managing your financial future. Set it up once, and it does the work for you.
2. Promote Round-Up Apps and Programs
Apps use the “round-up” method, making saving effortless. They round up every purchase to the nearest dollar, putting the spare change into a savings account. These small contributions, often pennies at a time, add up over time.
It’s a subtle way to save, and you’d be surprised how those small amounts grow. It’s like a digital coin jar without the hassle of clinking and counting. Round-up apps and programs help consumers save without even realizing it.
3. Leverage Tax Time to Boost Savings
Tax season offers a chance to significantly boost savings accounts. For some, it’s the largest windfall they see all year. Encourage customers to pre-commit to saving some or all of their tax refund before receiving it.
This can help them make significant progress toward financial goals. Many institutions offer savings products specifically for tax refund deposits. Plus, the psychological element of committing ahead of time is effective.
A study by the Common Cents Lab in partnership with Digit found that pre-committing to saving a portion of tax refunds resulted in 58% higher savings compared to deciding after receiving the refund. That’s a testament to the power of pre-commitment.
4. Encourage SMART Savings Goals
Help your customers understand the importance of Specific, Measurable, Achievable, Relevant, and Time-Bound (SMART) savings goals. Guide them to identify what they want to save for, like an emergency fund, vacation, or down payment.
This transforms saving from a vague idea into a clear and actionable plan. SMART goals provide a roadmap for consumers to achieve their savings aspirations. The Financial Health Network’s research on Digit users showed that having multiple savings goals led to increased savings activity.
Digit users with multiple goals deposited $114 more on average in their first five months than those with a single goal. Separate funds aligned with different saving intentions resulted in greater saving activity.
5. Offer Savings Incentives & Match Programs
Consider offering incentives or match programs to motivate customers to save more. These can be structured as deposit matches, rewards points, or even entry into prize drawings.
Incentives effectively get people excited to save, making it less of a chore and more like a game with a fun payoff. A 2015 study found that even with a low chance of winning, “prize-linked savings” increased motivation.
The opportunity to win money or receive a bonus provides an extra push to prioritize saving. Offering these types of incentives is a great way to teach consumers how to improve their credit score.
6. Gamify Saving
For those motivated by competition, gamification can be highly effective. Consider savings products with interactive features like progress bars, point systems, badges, and even virtual challenges. Many financial institutions incorporate these features.
Apps can track users’ savings progress, letting them achieve higher levels as they save. This makes learning engaging. Research by Nethal Hashim, Irene Scopelliti, & Janina Steinmetz (2021) showed that games make it easier to save and hit financial targets.
Who knew saving money could feel like beating a high score? Gamification adds a fun twist to encourage regular savings. This is a great way to reach younger consumers and teach them how to manage money.
7. Offer Financial Education Workshops
Host workshops or provide online resources focusing on practical money management and saving strategies. Partner with organizations like America Saves, which offers information on saving for college through 529 plans and helps to create a down payment fund.
Some workshops could focus on budgeting techniques, building an emergency fund, or negotiating lower utility bills. These workshops teach consumers smart budgeting tips. It’s a great opportunity to connect with the community. Financial education is key to empowering consumers on their savings journey.
Creating a Culture of Saving
While individual efforts are important, a supportive financial system plays a key role in fostering a culture of saving. By encouraging proactive measures like automated deposits, financial education, and flexible bill payment dates, you can empower individuals to prioritize their financial well-being.
This might involve collaborating with employers to offer direct deposit options, allowing employees to easily allocate a portion of their paycheck to savings. Another option is to encourage schools to integrate basic financial literacy into their curriculum.
Even streamlining processes, like adjusting bill due dates based on paydays as the Common Cents Lab did with Beneficial State Bank, helps people avoid unnecessary fees and prioritize timely payments. By promoting financial wellness across sectors, we create a society where financial health is attainable.
Consider these examples:
- Self-Help Credit Union implemented a “transparent default” system for retirement accounts. Members are automatically enrolled with an option to immediately change the deposit amount. Imagine adapting this for short-term savings.
- The Latino Community Credit Union connected savings with debt repayment. Their product ties a savings element into their loan program. Borrowers simultaneously chip away at their debt and create a safety net. This simplification led to members saving over $1,000 on average by the end of their loan terms.
Empowering Savings Through Smart Decision-Making
A major aspect of how to help consumers build savings involves promoting mindful financial decision-making. Providing information that simplifies personal finances and makes them easier to understand is crucial.
Harnessing the Power of “Rules of Thumb”
We’re all familiar with catchy sayings like “don’t wear white after Labor Day” or “an apple a day keeps the doctor away.” These are simple examples of “rules of thumb” – easy-to-remember principles that guide us.
These rules can also make a difference in managing money matters. A study focusing on small businesses found that teaching small business owners money-related rules of thumb improved their financial literacy. By applying simple principles to spending, account management, and their overall view of money, they saw positive results.
Their bookkeeping, accounting, and even revenue improved. The Common Cents Lab explored these handy heuristics for budgeting, particularly for dining out. They discovered that rules like “Only eat out once per week” were more effective than vague goals or strict limits.
It makes sense—clear, simple, and manageable are easier to follow. For those trying to reduce debt, the Patient Advocate Foundation offers free negotiating support. Share a few rules of thumb tailored to specific savings goals to empower individuals to make more conscious spending choices.
For example, if you’re worried about healthcare costs, the Patient Advocate Foundation offers free negotiation help. Remember, every little bit counts. Over time, those pennies saved accumulate into significant savings. When it’s time for upgrades, consider opting for energy-efficient options.
For instance:
| Goal | “Rule of Thumb” |
|---|---|
| Emergency Fund | Set aside at least $50 every payday or commit 10% of your income to savings. |
| Down Payment on a Car | Forgo one non-essential spending habit (daily coffees, subscription boxes, etc.) and dedicate that amount to your savings goal each month. |
This is how to help consumers build savings. By offering guidance and tools, you can empower consumers on their path to financial stability.
Conclusion
With planning, education, and the right tools, individuals can gain control over their finances and create a more secure future. By focusing on practical steps, making savings seamless, and empowering them with knowledge, financial institutions like credit unions can positively impact the savings landscape.
FAQs About How to Help Consumers Build Savings
How can consumers save money?
Consumers can save money through simple practices such as establishing automatic savings plans through their bank, participating in round-up apps that tuck away spare change, cutting back on non-essential spending, negotiating lower utility bills, and planning meals to minimize restaurant expenses.
How do you encourage people to save money?
Incentivize savings by offering programs like deposit matches, prize draws for savers, or incorporating game-like elements to track savings progress and goals. Gamifying saving can make it more enjoyable.
What is the best way to rebuild savings?
Starting small is key. Even tiny contributions made consistently add up. Prioritize automating savings through bank transfers, leverage tax refunds by pre-committing to saving a portion, and consider budgeting techniques like the “50/30/20 rule” that allocates 50% of income to needs, 30% to wants, and 20% to savings. And, don’t underestimate those little pennies from round-up apps.
How do you incentivize saving money?
Financial institutions can run promotional periods where they match a percentage of customer deposits, introduce rewards points earned for consistent saving, or collaborate with local businesses to offer discounts or special deals for customers who hit specific savings goals. Making saving rewarding keeps people engaged.
Conclusion
In uncertain times, finding ways to help consumers build savings and improving financial health are paramount. As economic realities evolve, our methods for encouraging saving must adapt. Empowering consumers through proactive programs, practical guidance, and creative incentives is crucial for promoting long-term financial well-being.
This is truly how to help consumers build savings.
