If you are like me, you have been quite puzzled by this Bank of America “Keep the Change” scheme that is supposedly designed to promote personal saving. Alex Tabarrok is like me:
Look, I can understand Ulysses tying himself to the mast, I can understand locking the refrigerator and I can understand Christmas accounts but I will never understand how anyone can increase their savings by taking money from one account and putting it into another. [Emphasis added.]
Saving is not saving because it is in a “savings account.” Money that is not spent in a savings account is no different than money that is not spent in a checking account. Sure, savings accounts pay higher rates of interest, but the checking account is easily accessible without a trip to the bank. Thus there is a trade-off between accessibility and interest. The fact that money resides in a checking account only tells me that the individual values the accessibility of the money more than the foregone interest. A transfer from one account to another reflects a change of preference, not saving.
3 responses so far ↓
jk // July 13, 2007 at 10:35 am |
Color me undisturbed. There is a target group for this, and for them it is pretty innovative.
The target is people who do not save any money at all. They lack the discipline to grab $50 and stash it. But if $50 worth of “change” is put into savings, they do not miss it. Sure, they can withdraw it. The hope is that they enjoy, after a few months, the security of having $150 sitting there and begin a more aggressive savings program.
Reading the comments at the Marginal Revolution site , it seems BoA matches your contributions for the first three months. So, my fictional saver now has $300. He might withdraw and blow it, but he might also appreciate the unusual feeling of having a little security.
Actually, this was my hope for Private Social Security accounts. They were obviously going to be very small at the start. My hope was that first time savers would get excited by having a little money with their name on it and would push to have more of their payroll taxes diverted to their private accounts, and start saving on their own.
tfl: The Flatiron Life » Blog Archive » Save Me // July 13, 2007 at 11:43 am |
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