Combating a 'Spending Addiction'
“You guys have an addiction problem. You should go to an addiction place, because you cannot stop spending!”
Arnold Schwarzenegger once famously uttered those words while complaining about California politicians. He could well have been scolding the average American consumer and with good reason. Americans love to spend and love to spend using debt. In fact, at the end of 2007, American household debt totaled $13.8 trillion up from $7.0 trillion at the end of 2000—an outstanding 97 percent increase in 7 years!
So, while the pundits and politicians continue to look for scapegoats to explain the current meltdown in the financial markets, one thing seems clear – it is unlikely that the world will continue to finance the American consumer. And, with the entire financial system thirsty for much needed liquidity, American consumers will be pushed to dramatically increase savings.
But changing lifestyles and habits isn’t easy. In my last blog, I spoke about the role of communities in financial advisory matters. Another use of an online community is to induce ‘good behavior’ in its members and this throws up some interesting options for banks in their search for deposits.
One such “interesting option” for inducing good consumer behavior is Smartypig.com. Smartypig.com is a cross between an online piggy bank and gift registry – it helps users set up structured contribution plans to realize specific savings goals. Smartypig.com works as follows: First, users open a high yield savings account on the website. Then, the user establishes a savings goal and, with the help of Smartypig.com, a monthly contribution calendar is suggested illustrating the achievability of even the loftiest savings goals. With a goal in place, an account holder is able to publicize their savings goal to friends, family, and even a community of users via the smartypig.com applications available on Myspace and Facebook.
The ‘Web 2.0’ component of smartypig.com is what makes the site unique. When your account is visible to your chosen community, there is added pressure to save as your community will keep you accountable for your savings goal. Also, if so inclined, a generous supporter can contribute to your account and help you reach your goal. Now, that sounds like a good deal!
Banks (thirsty for scarce deposits in the current credit crisis) are already taking advantage of this concept. Last week ANZ signed up with Smartypig.com to tap Gen Y customers in Australia. Look for banks in the US to follow with similar ‘community enabled’ savings concepts.
Learn more about ANZ and its partnership with Smartypig.com in this article.
