HBS professor Peter Tufano describes, new and old products targeted at people who haven't saved in the past and who don't have much money to begin with can make savings more feasible or more fun, or both
Putting together the money for everything from a short-term emergency to retirement is hard enough, a challenge that low- and moderate-income families endure every day. Yet as HBS professor Peter Tufano describes, new and old products targeted at people who haven't saved in the past and who don't have much money to begin with can make savings more feasible or more fun, or both.
I have observed use of the products elsewhere, and wrote a case study about one in South Africa called the Million-a-Month Account, known as MaMA. MaMA was remarkably successful, generating 750,000 accounts over two years. Unfortunately, this past spring the highest court in South Africa ruled it an illegal lottery and shut it down. In South Africa as in America, the state has a monopoly on what can be considered a lottery. A lottery is used as a source of public revenues. I'd be happy to have a debate about whether it's healthier for families to play the lottery or to save in lottery-linked savings programs. In one case, the losers have worthless bits of paper; in the other, they have their savings.
This article was provided with permission from Harvard Business School Working Knowledge.