Using Financial Innovation to Support Savers: From Coercion to Excitement

Peter Tufano, Daniel Schneider

UCC08-13: In this paper, we review a wide variety of programs that are used to 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 formal financial institutions. They embody a number of different assumptions about incentives, drawing from rational 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 underscore the range of possibilities that exists to meet the needs of heterogeneous savers…