Instead of birthday gifts, ask family and friends to crowdfund an emergency-savings account. And make it more credible with a “commitment device” – a penalty for failing to follow through and use the donated money only for emergencies. Savers can establish circumstances under which the funds might be used – such as promising to only dip into the funds to pay for a medical emergency or to ease an unemployment spell. The more credible the commitment, the more comfortable givers may be to contribute. Contributors can be rewarded with an update.
-Benjamin Harris, Executive Director of the Kellogg School of Management’s Public-Private Interface in Evanston, Ill., and former chief economist to Vice President Joe Biden.