It is no secret that Americans are all too familiar with debt. The national debt sits at a staggering $19 trillion and climbing. Student debt has been in the news a lot lately as well. During election season, candidates frequently discussed competing solutions for how to alleviate the growing number of Americans trying to pay off major loans.
While high debt levels are a serious concern, Americans’ poor savings habits are perhaps an even bigger issue. With over 66 million Americans without any money saved for retirement, there is a dire need for solutions to help jumpstart the process.
Some startups are trying to deliver new ways for people to plan for the future, making the savings process more a part of everyday spending. Eugeny Prudchyenko founder and CEO of EvoShare, a company that helps shoppers earn cash back for student loans or retirement accounts, answered some of my questions about how solutions that fit into existing financial habits can help alleviate debt and encourage better savings behavior.
Q: Where did the idea for cash back savings come from?
Prudchyenko: Initially, EvoShare wasn’t a tool for retirement savings or student loans. We started as a marketing tool for small business owners that leveraged a donation feature similar to Amazon Smile. Every time customers shopped, a small portion of what they spent would go to a non-profit of their choice. Needless to say, we failed. People weren’t motivated by our proposition and didn’t frequent the locations, which caused a lot of difficulty for me and my business partner.
Seeking clarity, I decided to drive to Lake Tahoe for a couple of days to think about what to do next. Fifteen miles into the trip I saw a Prudential billboard ad saying “the best donation is a donation to your retirement.” This made me think: “what if someone were to streamline a cash-back offering to people’s retirement accounts?” That’s when EvoShare was reborn; I made a U-turn and drove to my co-founder’s place. Four months later, we had launched a brand new platform.
Q: Why is cash back a good option to support savings and loan payments?
Prudchyenko: The lack of retirement savings and student debt are among the some of the biggest issues Americans face. There aren’t a lot of ways to solve the problem -- social security is not the answer, private sector solutions are heavily dependent on contribution rates, and those rates are not growing. Two factors influence this dilemma: first, people cannot afford to save more. Secondly, for those who can, there is a lack of discipline to keep doing it. A cash-back solution can solve both of those issues. It is free and it’s automatic.
Consumer spending in the U.S. will hit almost $12 trillion in 2017. Recapturing a small portion of this spending would give hundreds of billions in additional contributions towards retirement savings every year.
Q: How do cash back services like EvoShare develop partnerships with retailers and businesses?
In general, any cash-back program is a great loyalty tool. It even encourages people to spend more by giving them an impression that they are saving more by being a part of it.
EvoShare is more of a real savings tool. Furthermore, it’s socially conscious. For businesses who are supporting this initiative, it’s not only an effective way to retain their customers but also a way to make a positive impact on communities they serve.
We create a relationship between business and client that lasts a lifetime, which builds brand loyalty.
Q: What are the biggest challenges this industry faces?
Social Security is running out of money.
Trust funds will experience a cash-flow deficit beginning in 2019, meaning that they will pay out more than they bring in. Making matters worse, these funds are projected to run out of money entirely in 2034. After the funds run out, money flowing into the program will only be enough to cover approximately three-quarters of promised benefits.
Q: What other solutions do you see coming up in the next few years to help people plan for their future?
We see a lot of opportunities for growth in financial educational services like Mint, HelloWallet, PowerWallet, PersonalCapital, etc. It is hard to undervalue the knowledge they bring to their users. The main problem here is having to explain the complexity of personal finance solutions. Another problem is motivating consumers to act with discipline. However, we are optimistic that these tools will continue to grow and evolve into more digestible solutions for the average person -- with greater automation within platforms.