atans1

Use gambling instinct to boost CPF savings

In Casinos, Financial competency, Humour on 08/02/2015 at 5:16 am

No need for govt’s double talk of discouraging gambling, helping problem gamblers while having casinos and Toto. Juz embrace gambling LOL and use it to encourage less well-off S’poreans to save more in their CPF. And this allows the PAP administration, if it wants to, to screw the poor by lowering the interest rate.

Seriously, on top of the usual interest rates, offer “prizes” to less well-off S’poreans if they put additional $ into the CPF. The theoretical basis for the suggestion is as follows:

found that the presence of a prize-linked savings account increased the rate of total savings: the current consumption of respondents decreased by 7% when the option became available. In addition, they found that people reduced their use of the stand-alone lottery when they had the option of prize-linked savings. Strikingly, this effect remained even if the scheme offered a much lower average rate of return than the lottery or the fixed-interest rate options. That suggests premium bonds may well have saved the British government a lot of extra interest payments over the lifetime of the scheme.

These authors also found—confirming Macmillan’s suspicions—that these prizes were particularly attractive to those participants on low incomes or with a poor record of saving. Prize-linked savings induced individuals who reported little or no savings to increase their saving rate by an additional four percentage points compared with the average respondent.

….

The authors suggest that adding a random element to the interest rate entices people because it removes the stigma attached to gambling by packaging it with the more positive act of saving. That may explain why the concept has been so wildly successful. In Britain, they are now the most popular financial product after bank accounts; 21% of households are currently invested in them. Premium bonds have even spurred several private imitators, such as one product offered by Bank of Scotland which hands out monthly prizes to those who invest in it. Prize-linked savings accounts, it seems, have turned out to be not quite as squalid as Wilson once thought.

http://www.economist.com/news/business-and-finance/21625047

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