The choice to save comes down to each of us, deciding that it's what we want to do.
And it's tough. It can mean wearing the same boring shoes, instead of buying new turquoise flats. Or trying to explain to your kid why they can't have the new PlayStation. But, a funded savings account can also be the difference between an annoyance and catastrophe if your car breaks down.
So we thought we'd check out a few programs around the country set up to encourage people to save.
Starting in Los Angeles.
“When folks don't have an emergency savings to use as a cushion in case of emergency it makes them vulnerable,” says Olivia Calderone, director of LA's Financial Empowerment Initiative. One of the programs she helps oversee is called Bank on LA, which helps connect people with low and no cost bank accounts.
Calderone says 64% of Angelenos who make less than $30,000 a year don't have a savings account. “You aren't going to start saving if you don't have a savings account,” she says, “it's going to be very difficult to do so.” By helping people establish savings accounts with banks, the city is also helping them spend less on payday lenders or money orders; money that could go into an emergency fund or a retirement account.
So that's step one, giving people the tools they need to save. But then they need to add to those accounts.
“Most of us can relate to the idea that saving money is not really very exciting, or worse, it might even be self-denial or even depravation,” says Timothy Flacke, who heads a program called Doorways to Dreams or D2D in Boston, “so the question becomes, 'Is there something we could do that gives us an immediate jolt of fun or tension or excitement?'”
Flacke and D2D have a few answers. For fun, they’ve created financial literacy videogames, including one called Farm Blitz, where you manage a farm threatened by debt bunnies — bunnies that multiply, just like debt.
D2D has come up with other strategies to get people to save, including prize-linked savings accounts, basically a lottery for savers says Flacke, “where some or all of the financial return from savings, instead of being awarded in a very low, and frankly, not very exciting way, can be returned as prizes.” The program started in Michigan, and has since expanded to other states, encouraging people to save by getting them to dream big about the future.
Which brings us to another savings program, in another city, centered around those future dreams.
San Francisco has a program called Kindergarten to College, “that automatically opens up college savings accounts for every child that enters the San Francisco Public Schools at kindergarten,” says city treasurer Jose Cisneros.
The city adds $50 to each of those accounts. If parents contribute, private funders have partnered with the city to toss in a little more money. A few hundred bucks isn't going to go far in paying for college, but it's meaningful in another way, says Cisneros, “there's a recent study out of Washington University in St. Louis, that shows if a child grows up with a college savings account in the child's name, that child is 6 or 7 times more likely to go to college compared to a child without a similar account.”
Even if that account doesn't have a ton of money in it. “The impact was all about having built aspirations in the child’s mind,” Cisneros says.
Having savings isn't just about planning for the future; it can help shape that future.