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Treasury Notes

 Start Early to Automate Saving

By: Louisa Quittman and Katherine Sydor

America Saves Week provided a great opportunity for Americans to assess their own savings habits.  But in Treasury’s Office of Consumer Policy, our work to encourage Americans to set goals and save consistently continues year-round.
Innovations in banking and technology are making it much easier to do just that. For instance, when setting up direct deposit, employees can set aside a portion of every paycheck into savings accounts in addition to their checking accounts.  And even if one does not have the option of direct deposit, most banks are able to set up regular, automatic transfers from checking to savings accounts to help customers save consistently.
Emerging trends in financial services technology also provide an opportunity to develop new financial tools for consumers that can help encourage other sound financial habits.  In Treasury’s Office of Consumer Policy we are working to leverage these trends for consumers. 
One area where government encourages innovation is “smart disclosure” -- the act of making potentially useful data more readily available to consumers and innovators, who use it to build data-driven tools that help individuals better manage their finances, plan their expenses, and set savings goals.  Agencies across the government are expanding safe access to this data, and great examples of tools that can be developed using it are already in the market.  Even more advanced financial capability applications are still in the concept phase of development, but it can be useful to think about the possibilities these tools may hold for American consumers. 
·         What if consumers could quickly and easily pull up their own spending histories on a smartphone to view a comparison of their information to their peers or an ideal savings plan in order to adjust their spending habits immediately and reach their short- and long-term goals?
·         What if mobile phones sent alerts reminding consumers of what they are saving for every time they entered a tempting store?
We recognize that the financial stability of families across the country is essential to the overall economic health of the nation and that savings is a key component of financial success at all ages.  New innovations in personal banking tools and online account access are making those options more accessible and effective than ever before. 
Part of our role in helping to improve the financial capability of Americans is to chair the federal Financial Literacy and Education Commission, which is committed to promoting savings and other sound financial habits.  The Commission has set out a new priority for its work: improving the financial knowledge and skills of young people.  Over the next two years, members of the Commission will work to enhance and develop new strategies to help young people become more financially prepared.  The Starting Early for Financial Success framework will leverage the federal government’s resources to highlight the importance of financial capability to our nation’s future. 
In order to fully participate in economic and civic life, younger Americans need to be more financially capable than ever before.  Forming good money-saving behaviors early on is an important step in becoming financially successful throughout life.  At Treasury, we believe that technology offers a number of promising avenues in helping make saving money easier and more automatic for today’s consumers and in helping young people develop good savings habits early.
Louisa Quittman is the Director of the Office of Financial Education and Katherine Sydor is a Policy Advisor in the Office of Consumer Policy at the U.S. Department of the Treasury.
Posted in:  Consumer Policy
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