Social lending has become very popular. The economy has been suffering so much that most banks will not [...]
The idea behind social saving is that the more support you get in working towards your goals (especially in saving money) the more successful you can be. In general, that’s a good argument: I know that I’m more likely to complete a goal if someone will hold me accountable for it. In terms of goal-setting, accountability does not need to be formal — just the fact that someone knows about my goal and will think poorly about me if I don’t complete it is enough to encourage me. It’s a relatively simple hack that can really increase your ability to move forward on your goals. That holds true for monetary goals just as much as any other ambition.
Mint is a free web-based personal financial management service for the US and Canada created by entrepreneur Aaron Patzer. Mint originally provided account aggregation through a deal with Yodlee, but has since moved to using Intuit for connecting to accounts. Mint’s primary service allows users to track bank, credit card, investment, and loan transactions and balances through a single user interface. Users can also make budgets and goals, like saving $1000. Users also have the option to manually enter cash or check transactions.
SmartyPig, in particular, makes the most of this incentive. It goes beyond informing friends and family about your goals. Instead, the site helps to engage them in the savings process — to the point of offering ways to ask your friends and family to donate to your cause. No matter the reason you might like that level of engagement on your own, it does seem likely to help savers significantly. Of course, just making mention of your goals in a conversation with a friend or a family member may be enough to provide the same benefit.
Goal Oriented Savings
The benefit of having a checking account for daily expenses and a savings account for emergency funds is that the separate accounts provide a barrier preventing you from accidentally spending money that should go to funding your future. Goal-setting accounts work the same way.
A goal-oriented account allows a consumer to set a specific financial target, figure out how long it will take to reach that target and slowly sock away money in an account far away from the temptations of everyday spending. They are available in three varieties — registries, savings accounts, and subaccounts joined to a regular savings account or checking account.
“Goal-setting accounts basically just help you get organized and stay on track,” says Jon Gaskell, co-founder of SmartyPig.com, a site that allows consumers to set up free savings accounts for goals ranging from honeymoons to holiday savings. The accounts are insured by the Federal Deposit Insurance Corp. “There is hard data that suggests that putting pen to paper and saying, ‘I’m going to lose 10 pounds,’ gives you a much better shot of achieving that goal. Why can’t that work for your finances?”
Perks and pitfalls
Aside from simply separating funds, goal-oriented savings accounts — available through online institutions, brick-and-mortar banks and credit unions — offer other benefits. Some registries, such as DownPaymentDreams.com, allow friends and family to contribute to your savings goal, in this case a mortgage down payment.
Others like SmartyPig dole out rewards to those who meet their goals. SmartyPig savings account holders who meet their targets can (but don’t have to) use those funds to purchase gift cards that provide a cash-back reward of up to 14 percent. The reward can be deposited into a new savings account or added back onto the card.
A few institutions, including SmartyPig, also offer social-networking tools to provide an online support system that allows users to exchange money-saving tips.
Whether a goal-oriented savings account is right for you depends on how much you plan to save and how long it will take to do it. Goal-setting savings accounts are designed for short- and medium-term goals, not long-term projects like retirement or college savings. If you are saving more than a few thousand dollars or for longer than a year or two, you would get greater benefit from a higher-interest savings instrument such as a Treasury bond or certificate of deposit.
Banks and microfinance institutions are one way to bring financial series to the poor. Savings Groups, managed by the members and based on savings rather than debt, are another solution. In fact, we think they’re such a good solution that they really are revolutionary.
Savings Groups are self-selected groups of 15 to 30 women and men who get together to save and borrow. Rather than go into debt to an external institution, they manage their own savings through transparent procedures and all the money they earn through interest on loans stays in their village, and in their group.
In some cases a saving group makes loans to its members from the collected savings. All members must approve the loan, and because the loan is made with the members’ savings, they are very careful to make sure they trust the potential borrower. They also set limits on how much any one member can borrow – usually three times the member’s savings.
Money Go Rounds
MoneyGounds.com is a social network that facilitates Group Saving, borrowing and lending money to each other, and it’s an example of how Collaborative Finance using peer-to-peer services is directly making an impact on the world’s economy. As the world leans more towards collaborative consumption, one wonders what the hyper consumption system can come up with to compete with this revolution.
A Rotating Savings Group (RSG) is a group of individuals who agree to meet for a defined period of time in order to save and borrow together. Meetings are usually regular, each member contributes the same amount at each meeting, and one member takes the whole sum once.
As a result, each member is able to access a larger sum of money during the life of the RSG, and use it for whatever purpose she or he wishes. This method of saving is an informal alternative to banks or saving at home.
Since no money has to be retained inside the group, no records have to be kept; these characteristics make the system a model of transparency and simplicity.
Saving requires self-discipline, and a RSG provide a collective mechanism for individual self-control in the presence of time-inconsistent preferences and in the absence of alternative commitment technologies. As many RSG participants put it: “you can’t save alone.” A simple idea is that a RSG can serve as a commitment device and shows how repeated interaction can sustain roscas even without the use of community-level social sanctions.
Piggymojo uses goal visualization, social commitments, and mobile and online technology to help consumers quantify and enjoy the act of not buying. Research shows that impulse buying provides momentary satisfaction, but hinders savings efforts and contributes to debt. The goal of the Piggymojo project is to help low‐income earners increase their savings by motivating and enabling them to make ‘impulse saves’ that retain the satisfaction element of impulse buying without the financial costs. This project will integrate the Piggymojo solution with Brooklyn Cooperative’s core platform so that the impulse save results in money actually moving from the user’s checking account into a savings account. Evaluation partner Center for Community Capital at University of North Carolina-Chapel Hill will study how Piggymojo promotes the financial capability of Brooklyn Cooperative members.
Piggymojo’s mission is to help people save money by quantifying opportunities to avoid spending and to strengthen the connection between spending avoidance and savings. Piggymojo is a self‐funded startup project whose co‐founders have invested both their own capital and effort into developing the product, accompanying website, and serviceAuthor Google+ profile