Using Financial Innovation to Support Savers: From Coercion to Excitement

Abstract

We review a wide variety of programs that support savings by families, in particular by low- and moderate-income families. These programs range from ones that literally compel families to save, to those that make it hard not to save, make it easier to save, provide financial incentives to induce savings, leverage social networks to support savers, and finally, to programs that excite people to saving. These programs involve a number of different stakeholders, including governmental entities, social intermediaries, non-profit organizations, and for-profit firms including financial institutions. They embody a number of different assumptions about incentives, drawing from economics, psychology, and sociology. We describe examples of each program and provide some information on their economics and effectiveness. Our goal is not to identify the "best" program, but rather to lay out the range of innovations to meet the needs of heterogeneous potential savers.