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December 01, 2021

Here's a twist: A program that rewards you for not spending

Recently, we talked about Bill Thaler's work on why most of us have so much trouble saving money.

AdThaler believes that when it comes to something as important as saving for the future, all of us need to be coaxed into developing more self-control, willingness to battle procrastination and the ability to handle short-term sacrifices.

Well, it sounds like someone was listening.

Introducing SaveUp, a new incentive program that rewards consumers for saving money and paying down their debts with the opportunity to earn rewards including cars, vacations, and smaller items like gift cards and electronics.

SaveUp has partnered with more than 18,000 U.S. financial institutions so that their members can register savings and debt-bearing accounts. Will it work? Well, some people certainly think so.

While the model of rewarding certain behaviors with chances to win prizes isn’t new, the fact that SaveUp is encouraging healthy behaviour coupled with some attractive rewards makes it a site to watch.

Prize-linked savings could be a good way to get low-income consumers to save more money, according to this recent paper published by the National Bureau of Economic Research -- particularly if set up like a lottery.

The big difference, of course, is that win or lose you always get back the money you put in although the chances of winning drop as the prizes get more appealing.

People in the U.S. have already proven they have a voracious appetite for state lotteries that provide a similar thrill but with greater downside, NBER suggests.

And there is a precedent. Many Latin American banks give out prizes, while holders of Britain’s Premium Bonds can win extra cash if their account is the one called out during a regularly-scheduled lottery.

If SaveUP makes it across the border, will you sign on? Would the chance of winning a prize change your behaviour in any way?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...