While Americans are known for many wonderful things, being great savers of money is not one of them. In fact, in the event of an even minor financial emergency — $400 worth of an emergency — almost half of all American adults wouldn’t be able to cover it.
That unfortunate stat comes courtesy of the Federal Reserve, and in the event of such an emergency, 47 percent of Americans would have to sell something, borrow or just not pay at all.
The reasons for the savings crisis are complicated and polarizing. There is the reality that spending money is a lot more fun than saving money. There is also the fact that incomes — particularly among working and middle class Americans — have grown less quickly than expenses like housing and healthcare. Reasons why Americans do not save at the level they ought to abound; solutions to getting the average U.S. customer onto the straight and narrow savings path are few and far between.
But Walmart has a solution — consumers like spending money because it is rewarding. If saving were rewarding, too, maybe consumers would feel more compelled to save.
And so yesterday Walmart, in cooperation with Green Dot, announced the launch of “Prize Savings,” a prize-linked savings incentive program available to the millions of Walmart MoneyCard holders.
So how does it work — and why will it help?
Prizes and opportunities for victory are both very, very rewarding.
So why would Walmart get involved in helping make the customers better savers? Two reasons, Walmart’s Services Senior Vice President Daniel Eckert told reporters today. The crisis is of enough concern that someone has to do something — and Walmart, with its massive scale, scope and consumer reach, actually has the ability to make something happen here.
“According to The Federal Reserve Board of Governors, nearly half of all U.S. families can’t cover a $400 emergency with their savings. That’s a reality we don’t want our customers to have to live with, and we thought we could help,” Eckert noted. “Using our size and scale to take on issues that are affecting our customers is at the core of what we do. Along with Green Dot and Commonwealth, we think ‘Prize Savings’ can help drive change and address an important issue in a new, innovative way.”
And innovate they have — albeit quietly up until now. This isn’t actually a new service Walmart is rolling out — Walmart actually rather stealthily launched the nation’s first national and retail prize-linked savings program back in August of 2016. This adds to Walmart’s growing list of financial services offerings — along with check cashing, money transfers and payments.
To use the program, MoneyCard users log into the Walmart MoneyCard app or website to transfer money from their Walmart MoneyCard balance into a separate MoneyCard Vault. The vault is essentially a free savings feature that comes part and parcel with the MoneyCard.
The gamification element begins once that money hits the vault. Each dollar a customer saves equals one entry in that month’s national sweepstakes drawing. The top prize each month is $1000, about 500 total prizes are given out — and the average “win” is around $25.
The winnings are deposited back onto the user’s money cards.
Will It Work?
Well, the program has been up and running for a little over four months — and the early data indicates that it’s actually already working. Since the launch, usage of the MoneyCard Vault is up more than 130 percent. MoneyCard Vault users are also saving more; when the program launched, the average savings account was $413 — and as of yesterday, that figure had climbed 35 percent to $572.
“Millions of Americans have come to the Walmart MoneyCard to get control of their money, avoid overdraft fees, and not have to worry about a credit check to get a card,” said Steve Streit, chairman and chief executive officer of Green Dot Corporation. “‘Prize Savings’ introduces an opportunity for these customers to get even better control of their finances, encouraging them to build a safety net to protect themselves when they need some emergency funds and save for the future. By working with Walmart in this effort, we’re giving millions of our customers tools, and cash-prize motivation, to make that happen.”
Will Walmart alone be enough to reverse the American savings crisis? Probably not. But if Walmart can help move a large swath of customers toward saving — particularly the working and middle class consumers they primarily serve — they could potentially help a lot of Americans have that extra $400 on hand when bad luck comes knocking.