Saving Money, with Help from the Government

Lower-income groups can save more money when it's easier to do so.

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Following up on yesterday's post on whether saving money is a luxury, I also spoke with Barbara Dafoe Whitehead, director of the John Templeton Center for Thrift and Generosity at the Institute for American Values. She says that while it is, of course, harder for lower-income groups to save money, it's still possible, and the government could do a lot to make it easier. For example, she thinks that state lotteries undermine people's efforts to save. If people put that $5 a week into a savings account instead of a lottery ticket, they could start to build a nest egg.

She would also like to see the federal government incentivize saving by creating matching programs -- something President Obama has called for, as well. Whitehead imagines a plan that would require employers to automatically enroll workers into a savings plan. Those that didn't want to participate could opt out.

This idea reminded me of the work of Helen Levy, a researcher at University of Michigan's Institute for Social Research, who found that among lower-income women, significant savings came primarily from automatic programs, such as 401(k)s. When left to their own devices, people tend not to save money, because there are so many other demands on their budgets.