Saving Brick by Brick | Poor Economics
Chapter 8
Saving Brick by Brick

The Victorians used to think that poverty went hand in hand with impatience, at best, and sloth, at worst. It was believed you had to frighten and punish the poor into thinking that any misstep off the straight-and-narrow would cause them to plunge into even more terrible conditions. 

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Just as with lending, banks have not found a good way to adapt their services to the poor. The administrative costs associated with managing small accounts are too high.
Instead, the poor find unusual and ingenious ways to save. They buying durable goods like jewelry or new bricks for their house. Many form savings "clubs" such as the popular rotating savings and credit associations (ROSCAs) in Africa.
However, the fact that the poor have to adopt complicated and costly alternative strategies to save means that saving is harder than if they had a bank account: access to a saving accounts increases profits and consumption.
With new technology and innovations like M-PESA in Kenya which allows cell phone users to send money with their phone, microsavings might become the next microfinance revolution.
However, not all barriers to savings are externally imposed. The poor, like anyone else, easily give in to the temptation to spend money in the present rather than save it for the future.
They have difficulty, for example, saving enough over a short season to buy fertilizer; but a program to help them buy it early increased fertilizer use.
The poor may be more subject to temptations than the rich because the items they dream of may be further from their reach.
Poor people who feel that they have opportunities have strong reasons to cut down on “frivolous” spending and invest in the future. Those who feel that they have nothing to lose, in contrast, save less: hope matters!

Savings studies

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Saving Brick by Brick

The Victorians used to think that poverty went hand in hand with impatience, at best, and sloth, at worst. It was believed you had to frighten and punish the poor into thinking that any misstep off the straight-and-narrow would cause them to plunge into even more terrible conditions. 

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The Victorians used to think that poverty went hand in hand with impatience, at best, and sloth, at worst. It was believed you had to frighten and punish the poor into thinking that any misstep off the straight-and-narrow would cause them to plunge into even more terrible conditions.

Today’s more benign version of this argument is: “How can the poor save when they have no money?" In fact, the poor do save and they do it despite considerable odds: no bank will take their savings, and money saved at home is not very safe. Still, like the rich, they tend to procrastinate and give in to temptations. The double injustice is that these temptations are more likely to derail the poor, and that they have fewer guards against them. 
 

Spotlight

Maureen Tkacik/ Bloomberg Businessweek / 2 July, 2009

The financial crisis blew a hole in big-think economics, raising the profile of a new breed of skeptical empiricists committed to assiduous testing and tangible results, no matter how tiny. Even lentils can lead to little miracles, and helping farmers save for fertilizer can lead to a dramatic uptake in fertilizer use.

The Victorians used to think that poverty went hand in hand with impatience, at best, and sloth, at worst. It was believed you had to frighten and punish the poor into thinking that any misstep off the straight-and-narrow would cause them to plunge into even more terrible conditions.

Today’s more benign version of this argument is: “How can the poor save when they have no money?" In fact, the poor do save and they do it despite considerable odds: no bank will take their savings, and money saved at home is not very safe. Still, like the rich, they tend to procrastinate and give in to temptations. The double injustice is that these temptations are more likely to derail the poor, and that they have fewer guards against them. 
 

Spotlight

Maureen Tkacik/ Bloomberg Businessweek / 2 July, 2009

The financial crisis blew a hole in big-think economics, raising the profile of a new breed of skeptical empiricists committed to assiduous testing and tangible results, no matter how tiny. Even lentils can lead to little miracles, and helping farmers save for fertilizer can lead to a dramatic uptake in fertilizer use.