Vestwell Takes ‘Rainy Day’ Savings Literally
The digital recordkeeper has a new tax-deferred savings program that makes automatic contributions dependent on when it rains in the saver’s neighborhood.
Digital savings provider Vestwell wants people to save for those rainy moments in life when it’s, well, raining out.
The digital recordkeeper introduced Thursday its Weather Boosters savings program, which allows savers in 529 education and ABLE disabilities savings accounts to set up automatic contributions to be made when it rains in their zip code. When participants activate the program, they can choose to contribute from $1 up to $25 whenever weather.gov forecasts a higher than 50% chance of precipitation in their area.
The idea, while based on a word pun, is grounded in the fact that most people only contribute to voluntary tax-deferred savings programs at specific moments such as tax season or when they receive some kind of windfall, says Douglas Magnolia, chief customer officer and president of Vestwell State Savings. By tying contributions to a regular, trackable event, it ensures more consistent savings.
“What we wanted to do is create a method that leverages the internet and consumers that is set-it-and-forget-it,” he says. “While life happens in the background, there are things that are going to happen that will help you save for your future.”
Vestwell chose 529 and ABLE accounts because they are programs that require participants to decide to put money in, as opposed to the automatic paycheck deferrals of 401(k)s.
“This is particularly useful for smaller-income families who might only be able to contribute $5 or $10, but that will add up over time,” he says.
Magnolia says he had tested a similar program when he was at BNY, and it was a big success—helping to increase participant savings. At Vestwell, a provider for various state savings programs including individual retirement accounts, his team plans to expand the program into emergency savings and IRAs.
They’re also looking at different events to track beyond the weather—potentially sporting events such as the Olympics or March Madness could provide an excuse for people to save.
“Anything that is reportable or trackable via the internet, you can create a booster for,” Magnolia says.
For now, savers in Vestwell 529s and ABLE accounts can set up Weather Boosters through their dashboard and set the contribution amount and the location where rainfall should be tracked.
When it comes to 529s, Magnolia says, the “rainy day” savings can also be a good way for parents to engage their kids with education savings.
“It’s a little cheeky, but it incorporates a little financial education capability for a parent by giving them a chance to talk to a child who might be the beneficiary of the savings,” he says.