A Life Course Savings Account

In an effort to increase the savings rate among UK citizens, the Institute for Public Policy Research, a UK think tank performed a study among low to middle income earners. They found that only 50% of those questioned, have a month worth of savings in their Individual Savings Account (ISA).

Saving Rate Falls In the United Kingdom

The IPPR's purpose in this study was to question the participants on why they weren't currently saving and what could be done to design a vehicle to help them do so. In July 2010, the UK government announced that they were going to create a vision to help promote a higher level of savings in the country and change savings behavior.

The saving rate in the UK has been dropping steadily the past 15 years. In 1995, UK citizens saved around 10.3% while in 2008 that fell sharply to
just 2%. Today, the savings rate is around 5.4%.

Why don't people save?

A National Savings & Investments (NS&I) survey conducted revealed the following reasons:

1. Can't afford to save. Expenses prevent me from saving
2. Don't think they can save more
3. Don't see a need to save
4. Don't have time to sort it out
5. Don't trust financial providers
6. Find saving too confusing
7. Don't know

Provide Government Incentives To Save

IPPR's recommendation to encourage savings is to create a government sponsored program to reward citizens through bonuses. The Lifetime Bonus Savings Account would pay a yearly bonus to each ISA account holder on a sliding scale:

• 1 Euro for every 10 Euros - for the first 1000 Euros
• 1 Euro for every 20 Euros - for the second 1000 Eurors
• 1 Euro for every 30 Euros - for the third 1000 Euros

The maximum yearly bonus would be 183 Euros as a cap is placed above 3,000. Participants in the study said that they would in favor of a savings account provided by supermarkets so their funds could be easily deposited.

The act of the government giving you money for saving, is an interesting one, Would the same idea fly here in the United States? Sure, why not. Giving rewards to those that save is a natural incentive to make people do things they normally won't do.

About Kerry Kobashi

Kerry is the founder of KerryOnWorld. He lives in Silicon Valley and has worked as an engineer and project manager. He owns Kobashi Computing a consulting company.