It may not be a popular sentiment during the holidays, but there’s a benefit to saving more and spending less any time of year. Having savings reduces stress, providing a cushion when emergency expenses arise. And due to the power of compound interest, saving even modest amounts over the course of one’s working life can lead to a retirement that is more comfortable. Furthermore, surveys have found a link between saving money and overall happiness. Even in the consumer-driven U.S. economy, 62% of Americans say they prefer saving money over spending it.

Try to square those points with the following statistics:

Clearly, something is preventing those who desire to save money rather than spend it from actually doing so. Many analysts blame the problem on a number of factors, both systemic and psychological. Stagnant wages over the past few decades have left all but the wealthy with fewer surpluses to set aside. Around 40 million unbanked Americans don’t have a savings account, while declines in interest rates have made savings accounts less attractive for those who do have one. Meanwhile, the easy availability of credit has made saving less of a priority.

Many of these issues are also reflected in developing countries. Indeed, with lower overall income and greater disparity between financial inclusion levels, the problem is often worse in developing economies.

Nevertheless, aside from tackling the more vexing challenge of global inequality, what can be done to address the savings crisis?

A number of solutions exist, including policy changes and innovative business models. For instance, analysts have proposed changes to the U.S. tax code that would incentivize savings for low-income Americans, who receive a nominal proportion of federal tax benefits compared to those with higher incomes. Researchers have also suggested leveraging behavioral science research to increase savings by shifting the default mechanism for companies’ retirement savings plans from opt-in to opt-out. What’s more, a growing number of credit unions and non-profits are using prizes to incentivize savings, entering customers in a monthly lottery for deposits of a set amount – in fact, a new federal law promises to expand the approach across more financial institutions.

For-profit companies have also gotten involved. Meed aims to expand financial inclusion by linking members with banking services through a mobile interface. Their product suite includes an interest-bearing security savings account, which serves as collateral for credit while encouraging savings by restricting withdrawals until age 59. In addition, half of the interest generated from Meed’s SocialBoost™ is deposited directly into members’ security savings account so they can save even more.

Combined with a growing interest in microsavings among financial inclusion advocates, these efforts form part of a global movement to help address an imbalance that’s been growing for decades. So if your monthly credit card bill is looking more robust than your monthly 401(K) statement, help is available and on the way.


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