It is a difficult time to think about saving. The scale and immediacy of the squeeze on incomes and the cost of living have meant that living standards have taken an immediate hit for millions of people across the UK. As a consequence, rather than making saving a priority, many people may be dipping into their savings more than before.
However, we know that making a habit of saving money is crucial to long-term financial wellbeing. Putting money aside could affect more than just the money we have in the bank; it provides us with financial security, peace of mind, greater choices of where to live and under what conditions, and helps us to stay healthy.
Yet over 10 million working age people in the UK do not save regularly – with 2 million people not having any savings at all – and are classified by the Money and Pensions Service (MaPS) as financially squeezed or struggling. This leaves people vulnerable to unexpected costs and debt, particularly when prices are rising.
To help people save more of their money, banks, building societies and credit unions have launched accounts in recent years known as prize-linked savings accounts. These accounts represent an innovative approach that enters savers into a periodic cash prize-draw if they save regularly. They can be a powerful tool to get more people to save.
We wanted to find out more about how prize-linked savings can be better communicated to potential savers. The Financial Capability Lab, a partnership between MaPS and the Behavioural Insights Team, conducted an evidence review and experiment with Nationwide Building Society that gave us a closer look at how people that might typically save less interact with prize-linked savings accounts. In this blog, we share three ways that behavioural insights we found that can support banks, building societies and credit unions to use prize-linked savings to increase saving behaviour.
Read the report
Shout about the prize
There is promising evidence that prize-linked savings can support low-income households to overcome some of the barriers to saving and encourage saving behaviour.
However, some financial institutions might be reluctant to promote prize-draws where some customers win and some don’t. Prize-linked schemes gamify financial behaviour and could be seen as similar to gambling (although in this instance no money is ever lost). Banks, building societies and credit unions could be understandably wary of the comparison.
However, in our work with Nationwide, we found that highlighting the prize-draw aspect – as shown in the advert above – generated more interest in the account than messages that highlighted other features like the ease of saving.
We also found that interest in the account rose even more once further information about basic features of the account like the interest rate and deposit criteria was shown. This suggests that provided the product is well designed, promoting the prize draw of an account can capture people’s attention, and the accounts themselves are sufficiently persuasive to encourage people to sign-up and start saving.
Read the report
Frame deposit messages in daily terms
Prize-linked savings accounts enter people into a free prize draw so long as they save a minimum amount each month. How that deposit amount is set and communicated has important implications for whether people take up prize-linked savings.
One study found that framing the deposit requirements as smaller daily amounts rather than as larger monthly amounts quadrupled the number of consumers who enrolled into a regular savings account. Consumers potentially perceived the small, daily deposits as being less psychologically painful and more feasible compared to the larger monthly deposit amount.
In our work, we found that any message with a daily framing – e.g. save less than £1 per day and be entered into a prize draw – was more popular with trial participants than a monthly framing. Thus, framing the monetary commitment required in terms of a daily amount is likely to appeal more to customers, and appear more manageable, than a monthly savings goal.
Offer smaller prizes, more often
Behavioural research has consistently found that people tend to prefer smaller, more immediate rewards to larger, more distant ones. In prize-linked savings accounts, the opportunity to win a reward is typically offered after a customer has been saving for some time. This is to incentivise people to save regularly and reach a desired savings goal.
“Would you be most interested in a prize draw where…” |
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| £30 was awarded to 1 in 34 every month | 38% |
| £90 was awarded to 1 in 34 every 3 months | 20% |
| £200 was awarded to 1 in 34 every 6 months | 27% |
| £350 was awarded to 1 in 34 every 9 months | 4% |
| £500 was awarded to 1 in 34 every 12 months | 11% |
| N=4505
Data collected December 2021. Sample: UK adults identified as financially struggling. |
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The opportunity to win a prize more frequently may be particularly appealing to those who are financially squeezed or struggling. In our experiment (see Table 1), a plurality of respondents preferred a shorter prize more frequently than a larger prize less often and responses comfortably skewed towards more frequent small prizes than less frequent large ones. Giving people a sense of progress by paying smaller bonuses more regularly, rather than less frequent larger prizes, could help people to save.
What do these findings mean for banks, building societies and credit unions?
Coupled with existing research on how to use prize-linked savings to increase saving behaviour, our project with MaPS and Nationwide suggests some clear recommendations for banks, building societies and credit unions looking for innovative ways to increase saving behaviour:
- Prize-linked savings accounts can encourage saving behaviour. To maximise sign-ups, the size and frequency of the prize should be communicated clearly in promotional material.
- Deposits should be framed in daily terms to increase interest and confidence in saving and encourage people to sign up to a savings account.
- Consider smaller prizes, won by savers more frequently to increase interest in the account and to maintain saving behaviour over time
