Between rising costs and stagnant salaries, Americans are saving less than ever. The 2008 economic crisis is often blamed, but Americans have been saving less for quite some time now. Consumer trends and alternative credit options have convinced people that there are other ways of generating value in the short term, distracting them from the necessary habit of putting away funds for the future.
Add in the kinds of debt that people are willing to incur, and the U.S. has a major problem on its hands. NerdWallet reports that the average American household spends $1,300 on interest on credit card debt alone. Student loan debt has skyrocketed in recent years to a shocking $1.28 trillion and shows no signs of decreasing anytime soon.
These issues were often discussed on the 2016 campaign trail, with a few candidates — Trump, Clinton and Sanders — offering their own solutions. Sanders argued for higher minimum wages coupled with free education for all students. Clinton advocated for income equality and better treatment at the workplace, while Trump argued for bringing jobs back to the U.S. Seldom did any of them discuss how to motivate Americans to make better financial decisions and prepare for a timely retirement.
The good news is while politicians may have missed the mark last year, entrepreneurs have been hard at work thinking of new ways to help people plan ahead and do the tough work of saving. Eugeny Prudchyenko, CEO and founder of EvoShare, explains how he caught inspiration to help solve this problem.
“I spotted a Prudential billboard saying ‘the best donation is donating to your retirement.’ This made me think, ‘What if someone were to streamline popular cash back solutions to people’s retirement accounts?’ Which is how EvoShare’s cash-back service was born.” Other entrepreneurs and innovators are catching the same spirit and developing unique approaches as well.
1. Increase savings through spending.
Many companies realize that instead of pushing back on consumer spending habits, they can tap into them to help customers save. Companies like Target and GAP have done this to help encourage charitable donations by giving shoppers the option to allocate a portion of spending to charitable causes. Prudchyenko shares, “If we don’t want to have taxes and retirement age increased, migration of responsibility for people’s retirement from the private sector to public sector should be stopped. Utilizing new sources for retirement contributions can significantly impact this accomplishment.” Solutions like these are great because they tap into real consumer trends rather than trying to alter them, creating alternative avenues to drive savings behavior.
2. Employee benefits alternatives.
More and more companies are searching for alternative ways to help their employees contribute to retirement. While the traditional pension of the 20th century is rapidly disappearing, companies haven’t stopped caring about the later-in-life success of their employees. That’s why large companies have 401k matching plans and other vehicles for helping employees plan for the future. Prudchyenko shared that EvoShare is working with companies to help create cash back tools for their employees’ retirement. This is a part of a growing movement comprised of business owners looking for creative ways to help employees without negatively impacting profitability.
3. Banking alternatives making waves.
Millennials are naturally skeptical of traditional financial institutions. They watched as their parents struggled through the recession due to decisions they made on the advice of many different kinds of financial professionals, and as a result, they tend to seek out alternative methods for managing their money. The result has been an onslaught of startups catering to alternative banking and investing. Companies like Simple, which creates a “bank free” debit option, and apps like Mint that track spending, help consumers transact and track their decisions outside of traditional banking.
As the financial sector evolves to meet consumer demand, one thing is certain. Any business trying to help solve for the consumer stands to be the most successful. When entrepreneurs develop new approaches to old problems, the result is often a better market for everyone.