When a bank launches a good product, it's worth noting and patting them on the back. Part of TD Bank's Get Saving campaign is a clever new tool to help people save. The 1-minute video Tools to help you save explains: each time you make a purchase using your debit card or take money from a cash machine, a pre-set amount (which you set between $0.50 to $5.00 per transaction and can change) is transferred to a savings account. It's the psychological aspect I find most intriguing and promising. First, it's automatic so it's easy. Second, you make the decision to save in advance - people have a much easier time deciding to save more in the future than now. It could actually work!
There is a third aspect, whose effect I could see being good or bad. There is a feedback link to spending - as you spend more, you save more. Will that reduce people's spending by making the money run out sooner or making them think it will, or raise their awareness of how often they are spending? Or will it cause people to think that spending more matters less since they are simultaneously saving more, (with the possible result that they end up being over-drawn - "borrowing to save" would not be good!)?
As an enhancement, TD could offer a pre-set percentage transfer e.g. 1 up to 10% (the latter is an often-recommended amount one should be saving out of income for retirement). That way, people would especially think about bigger purchases and they would save a lot more.
Thursday, 7 October 2010
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