With the new year upon us, setting goals is a staple for many and financial goals are at the top of the list. The top financial goals heading into 2024 are:
- Boosting savings,
- Paying down debt, and
- Minimizing spending.
Businesses, ranging from financial players such as money managers to non-financial corporations, like retailers and CPGs, can play a key role in helping their customers set and achieve financial goals. In fact, it’s quite intuitive that the places where people spend time and money are also the partners helping them save time and money!
In this article, we dive into how businesses can guide customers towards financial well-being, focusing on these top three personal financial goals.
Boosting customers’ savings through business solutions
A primary goal for many people is to increase their savings, especially an emergency fund. Life is unpredictable, and unexpected expenses can arise at any time. Establishing an emergency fund is essential to weathering financial storms without derailing your progress. Having enough to cover three to six months' worth of living expenses is a great start.
Businesses can offer innovative solutions that integrate saving into daily transactions. Implementing card-linking technology, for instance, allows customers to effortlessly direct rewards like roundups and cashback into an emergency fund. Establishing such funds is crucial for financial stability, offering a buffer for unforeseen expenses without disrupting other financial objectives.
With card-linking technology customers can shop and build their emergency in real-time. For example cashback rewards earned through eligible purchases can be directly transferred to a customer’s savings account that is dedicated as their emergency fund. Card-linking allows an easy transfer of funds without the hassle of needing specific brand or loyalty cards.
Helping customers pay down debt
Once an emergency fund has been created, tackling financial debt is essential to achieving financial stability. It's easy for debt to pile up quickly. And with a higher interest rate environment, the monthly payments can become a major burden.
Once customers have listed and categorized their debts, and then applied effective strategies like the debt snowball or avalanche methods, businesses can help make frequent and consistent payments to reduce interest costs and repayment time.
For instance, small amounts rounded up from transactions and applied to debt can significantly reduce debt, making everyday purchases a potent tool for reducing debt.
To illustrate this, consider an individual who has $40,000 in student loans at a 6.8% interest on a 10-year repayment term. That person’s monthly payment would be $460, paying a total of $15,239 in interest over the 10 year horizon. With rounding, he or she could add an additional $50 monthly payment, increasing it to $510, and pay $13,039 in total interest. That would net this person $2,200 in savings over a decade.
A business who is able to help this person save this much money with basic roundups offerings would be able to meaningfully engage this customer, earning their business and retention over time.
Guiding customers in effective budgeting
The final goal that is on top for many is spending less money. The best way to do this is by creating a budget to guide spending, but this is challenging to achieve in a high-cost-of-living environment.
With essential goods increasing by 13% yearly, individuals allocate a significant percentage of their income to cover their needs, taking away from their ability to cover wants and put money aside for the future. In fact, the U.S. average personal savings rate is just over 5%.
Here is where recurring depots, such as rounding, can help. Individuals can save in real time thanks to the power of recurring deposits. Customer’s can increase their savings rate as they spend. By slowly and constantly setting aside funds after each purchase, it can quickly accumulate into something meaningful. Additionally, rounding can be tied directly to goals that matter to customers, such as saving for a vacation, retirement or anything else they desire.
By incorporating recurring deposits with card-linking, emergency fund creation, debt management, and budgeting become more attainable. Financial planning is an ongoing process that is constantly changing and recurring deposits can adapt to any situation.
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