Banking with WiseWage By Adam Rust Goals for Today Learn some - PowerPoint PPT Presentation

Banking with WiseWage By Adam Rust

Goals for Today • Learn some more about how people bank and save. • Discuss New Thinking on Financial Health • Introduce WiseWage

Banking for Everyone? • There is a bank on every corner, but most banks are not interested in serving every person on every corner. • 14.1 million adults do not have a bank account of any kind. • 48.9 million adults might have a checking account, but they do not have a savings account.

What do unbanked people think about banks? • Most people without a bank account used to have a bank account. = they had a bad experience before • Only one-quarter of the unbanked have a stated intention to get an account . = people think they don’t belong in the system. • But - more than half of the unbanked are not interested in getting an account in the future. = they will need to be convinced to return to the system

Blue – a Reason not to have an account Green – main reason not to have an account 60 50 40 30 20 10 0 Don't Have Don't Trust Privacy Fees to High Surprise Fees ID, Credit Don't Need Inconvenient Other Enough Banks Hours Money

The unbanked and underbanked still have to pay bills – how do they do it? 80 70 60 50 40 30 20 10 0 Write a check use a credit card use a debit card electronic bill pay use a money order prepaid card cash Unbanked Underbanked Fully Banked

Younger people more likely to be unbanked Banking Status by Age Cohort 25 20 15 10 5 0 15 to 24 25 to 34 35 to 44 45 to 54 55 to 64 64 or older Unbanked Underbanked

The cost of being unbanked or improperly banked Unbanked: Americans spent $2.1 billion cashing checks, $3 billion in non-bank remittances, $900 million in walk-in bill-pay, and $800 million on money orders.* Improperly banked : 70 percent of checking account overdraft fees are paid by low- wealth individuals** Risky: Carrying cash puts a person at risk of theft. Negative experience = last experience: Overdraft and minimum balance fees convince people to leave the banking system. On average, low-wealth consumers pay four overdraft fees ($130+/-) per year. It’s not just the direct financial costs – it’s also the lack of velocity in receiving wages.

The Problem with Check Cashers WHICH CAN BUY…. They take Money DAYS OF GROCERIES SERVICE FEES CHECK 2 3 FOR A FAMILY OF 4 CASHERS TAKE FROM AVERAGE WORKERS OR… $ 2 3 7 PER SCHOOL LUNCHES YEAR 711 OR… PUBLIC TRANSPORT 3 5 5 SHORT TRIPS WHICH CAN BUY…. They take Time DATE NIGHT MOVIES 7 NUMBER OF HOURS CHECK WITH SPOUSE CASHERS TAKE FROM AVERAGE WORKERS OR… hr MATH PROBLEMS PER 1 3 9 SOLVED WITH CHILD 15 YEAR OR… FACEBOOK WALL 2 6 4 POSTS Source: CurrenC San Francisco 9

Savings is Hard to Do; It’s Worth It We had realized the American dream, and were living a very expensive lifestyle, the type of lifestyle where it is difficult to turn off the spigot.“ - Ken Lay, former CEO of Enron - Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it. Compound interest is the most powerful force in the universe. - Albert Einstein

Where do people save their money? 80 70 60 50 40 30 20 10 0 Save money under bed In a savings account in checking on a prepaid card Unbanked Underbanked Fully Banked

Path # One: Change How People Manage their Money

Findings from Data How Successful Savers Plan to Save They Tap the Power of their Goals • They establish a specific savings aim. • They plan how they will measure success • They make the goal relevant • They bind their goals within a period of time They understand their obstacles • They identify why, when, where you make mistakes • They create if-then plans • They make achievable goals

Findings from Data Habit Formation Best Practices E NDOGENOUS : • New exercisers (2017): high frequency, achievability, and known reward • New flossers (2010): Those who committed to flossing before (2.2x) or after (8x) an existing habit were more successful than those who did not. • New exercisers (2015): Rewards most effective with “skin-in-the game.” E XOGENOUS • New Voters (2003): one pre-election reminder increased participation for successive elections. • Savings deposits (2013): Reduce friction to deposit (with encouragement) and increase friction to withdraw

Results from the 52-Week Challenge $60 $1,600 $1,400 $50 $1,200 $40 $1,000 $30 $800 $600 $20 $400 $10 $200 $0 $0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 Left Side = Weekly Save Right Side = Net Savings

How are we doing as a nation of savers? Assets and Debts Self-perception • 40 percent of adults have less • Two-thirds say they are saving than $400 in cash for an money emergency. • Most people think they are • Most people have more debt experts on money. than savings • 20 percent say their retirement • Only 29 percent have six plan is to win the lottery months of savings

The New Retirement Savings Level upon Retiring Results • Most people plan to work part- time in retirement. Many people develop disabilities that make it hard to work. • Most people run out of money before they pass away. • Twenty percent say they will never stop working. • One in six people over 70 is still No savings <$5,000 working $5k to $74K $75 - $200k More than $200K

Path # Two Change The Products People Use to Manage Their Money • Could it be the products, not the people? • If so, what would the products be? • How would they be designed?

The Pillars of Success Access Build Net Safe Worth Credit Protect Manage from Risk Spending

About WiseWage.org • A web portal marketing overdraft-free FDIC-insured debit cards. • Easy-to-use, FREE, and available to consumers from smartphone or desktop anywhere in the United States. • They incorporate what we know about savings

WiseWage provides safe and affordable bank accounts • No credit pull. • Absolutely fee-free! • Our accounts pay more than 2 percent interest. • Each also has budgeting tools.

FDIC-Insured Digital Bank Accounts

Example – Empower Budgeting Tools

Compare current interest Rates on Savings at WiseWage versus other banks Interest Rate 2.5 2.15 2.12 2 1.5 1 0.5 0.25 0.03 0.01 0 0 Empower Varo Wells Fargo BB&T Self-Help Bank of America Empower Varo Wells Fargo BB&T Self-Help Bank of America

Oh, the money you’ll save! • No monthly fee • Free ATMs • No minimum balance fee • No fee to buy things • Free bill-pay • Free photo check deposit • No overdraft fees • No international transaction fees

Comparison of Accounts Bank of America Wells Fargo Varo Money Empower Monthly Fee $12 $10 $0 $0 Minimum to Open $100 $25 $0 $0 Waiving Fee Rules With Direct $250 $500 n/a n/a Deposit of at least: Or minimum $1,500 $1,500 n/a n/a balance of Overdraft fee $35 $34 n/a n/a Pays interest? 0.03% 0% 2.12% 2.15%

Let’s Try It – It’s Your Turn to Bank Better Questions? Call Adam – 919.260.3653 adam@reinvestmentpartners.org WiseWage.org