What would get you to save more?

Over the holiday break, I read about the winning idea in TIAA-CREF's Raise the Rate competition -- to "factor a person's savings habits into their credit score as a positive indicator of creditworthiness" -- and was surprised that it was selected as the winner.

I'm surprised because I wouldn't think savings would be a reliable factor in the probability that you would default, which is what the credit score is designed to measure, and because it would be a bit of a bear to implement.

My submission was to lower the tax rate you pay on the interest you earn from a savings account. You already receive this information as a 1099-INT, so the IRS already knows this is interest earned from an interest-bearing account. While it would fail a "difficulty of implementation" test, I bet you more people would save money if they knew they would be taxed less on the interest. (Many people invest in dividend-yielding stocks for this very reason.)

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I'd go so far as to say you get the first $X in interest tax-free. Congress could set that at $500, $1,000 or higher. People respond to financial incentives, and removing the tax would give people an incentive. But unfortunately, at least right now, it goes against the government's goal of wanting to boost consumer spending.

While less novel, I thought the idea of the People's Choice Award winner to create a Women's Savings Club would be more effective than the winning idea at increasing people's savings rate.

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Integrating savings rate into your credit score is certainly novel and interesting, especially since it's already being factored in by lenders, but I don't think it will increase people's saving. Do you?

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