The Inclusive Economy
Super Saver CD Helps Low-Income Earners Save
By Chelsea Prescotti, Guest Contributor on 11/17/2011 @ 11:45 AM
Saving money for the future is never an easy thing for anyone, no matter what our educational or financial background is. As the field of behavioral economics has established, instant gratification over long-term planning is both ingrained psychologically and culturally in consumer societies. For low-income earners especially, who do not have the luxury of financial planners or even the basic means to substantially contribute to their financial future, saving is doubly difficult.
A Connecticut-based organization, Innovations for Poverty Action, however, hopes to encourage low-income earners to save with a relatively new product launched this past summer. Called the Super Saver CD, it has enabled selected participants to put away money regularly like a typical CD, but its minimum deposit of $15 makes the savings product an affordable one. Another unique aspect of the Super Saver CD is that it can mature when a certain goal has been met, as long as participants have committed to saving for at least three months. For example, if an individual using the Super Saver CD is saving for the purpose of paying school tuition, she may withdraw funds once the school year begins.
The Super Saver CD developed by Innovations for Poverty in Action was modeled after a similar program in New York City, reports the Financial Security Project of Boston College. But, unlike the New York-based program, the Super Saver CD offered through a federal credit union in D.C., will also send some participants text message and email reminders. This part of the program is designed to address one of the core problems that obstructs savings behaviors—short attention spans. According to Boston College article, not all participants will receive reminders so that developers of the pilot program will be able to determine whether such reminders are affective in getting people to consistently deposit money.
Although the Innovations for Poverty Action Super Saver CD has been implemented for several months now, it is still too soon to track its success. A Chicago Tribune article followed up on the project in September and reported that interest in the Super Saver CD has been “encouraging,” according to project coordinator Rebecca Rouse.
Innovations for Poverty Action (IPA) was founded in 2002 by Dean Karlan, a professor of economics at Yale University. Interested specifically in behavioral economics, Karlan founded the organization in an attempt to, as noted on the IPA website, “design and evaluate programs in real contexts with real people, and provide hands-on assistance to bring successful programs to scale.”
Using randomized controlled trials as the basis of its methodology, IPA works on various development projects both globally and domestically, including projects that involve agriculture; charitable giving; education; health; microfinance and enterprise; governance and community participation; and water and sanitation.
Chelsea Prescotti is a consultant for www.creditscore.net. The Inclusive Economy thanks Chelsea for her thoughtful contribution!