December 3rd, 2014 2:39 PM by Eileen Denhard
Poor people don't save, but they sure do buy lottery tickets.
Can we turn this into a way to encourage them to save?
Yes, thanks to what behavioral finance experts call gamification. Legislation working its way through Congress, called the American Savings Promotion Act, It takes advantage of gamification. It would allow banks to offer savings promotion raffles. If you put $25 into a savings account, you get a raffle ticket that might land you a $10,000 prize at the end of the month.
Michigan launched a program like this for credit unions; more than 50,000 account holders have collectively saved more than $94 million. Sure beats trying to win the lottery!
Game theory also convinced regulators to change the rules for 401(k) plans: instead of “opting in” when you started a new job, you now “opt out” – meaning you are now automatically enrolled in your retirement plan at work unless you choose not to participate. Previously, most people didn’t bother to say yes; now they don't bother to say no. Guess what? Participation rates have shot up dramatically.
I strongly support this new legislation and urge all members of Congress to do the same.