Consumers will save, if you incentivize them to save. That’s according to a new report from the Consumer Financial Protection Bureau.
The CFPB released its findings on its Project Catalyst research project, which included that offering an incentivize and asking customers to put some of their money into a so-called savings “wallet” then “doubled uptake of the wallet.” Research also found that those consumers who chose to save with the help of the wallet continued their saving plans and had significantly less payday loans. This was all compared to people who were not offered the incentives at all.
“This Project Catalyst research shows that encouraging and enabling users of prepaid cards to set aside funds can help people reach their short-term financial goals,” said CFPB Director Richard Cordray. “Importantly, it also shows that consumers who are encouraged to save can reduce their use of payday loans.”
The project ran for three months and then tracked for another nine months. Maximum savings peaked at $150 but, after nine months, steadied at $100.
The CFPB is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act to provide financial services to underserved populations and research on the experiences of this group of consumers.
Studies show that, no matter the income, consumers report a desire to save more, never mind what they end up or are currently actually doing with their savings.
This, however, is an issue because consumers with low incomes may not have a savings account, but rather a checking or prepaid account. They tap into these funds for everyday expenses, which can be difficult for creating saving habits.
In the past three years, the CFPB has launched a slew of initiatives aimed at empowering consumers to help increase their financial knowledge and savings. Efforts include programs like Your Money Your Goals, an effort to provide financial education to low-income communities, and Ready? Set. Save! to promote tax-time savings.