July 28, 2011
New Product Boosts Low-Income Saving
A Connecticut non-profit is testing a new product to help low-income people overcome their particular obstacles to saving money.
Innovations for Poverty Action is recruiting participants at the District Government Employees Federal Credit Union in Washington. The effort replicates a program already up and running in New York City.
The product’s name, Super Saver CD, is a bit of a misnomer. It is a hybrid of a bank certificate of deposit and a traditional savings account. Its low minimum deposit – $15 – removes a formidable obstacle for people who can’t afford to shell out $1,000 for a CD.
Innovations for Poverty Action was founded by behavioral economist Dean Karlan at Yale University, and it designed the Super Saver CD to help people to act in their own interest and save. The human behavior that drives the product’s design is that people don’t always do what they say they’ll do. So the Super Saver CD requires that people commit to regular deposits. The idea is to encourage saving regularly, a little at a time, like a savings account. But once the money is put away, it can’t be touched – that’s where a CD-style commitment comes in.
Rosa Sorto, who irons linens at a Washington laundry service for hotels and hospitals, said the program appealed to her because she can put the money away and forget about it. …Learn More