A slow savings account

13.57, Wednesday 4 Apr 2012

Pensions have a very particular schedule. You pay in to the same plan - at a rate of 10% or more over a large chunk of your career - and it starts paying out at a fixed point: at age 55, or 60, or whatever.

It seems to me that a pension’s particular schedule should instead be one end of a spectrum, the other end of which is credit cards and savings accounts. And then we should fill in that spectrum.

See, savings accounts are a way of putting a little bit of money aside for a big future purchase or a “rainy day.” Unemployment insurance does the same job, but it has a fixed pay-out trigger.

Savings accounts, unemployment insurance, and pensions are all ways to smooth out spikes in income over time.

A credit card provides for smoothness too, only it smooths out income spikes into the past whereas a savings account or a pension smooths out income spikes into the future. There are also fixed term investment vehicles with tax benefits.

I wonder whether there’s another kind of income smoothness service, one possible only with modern computerised record-keeping?

I’ve been using Twitshift, which lets me follow myself from a year ago on Twitter. I get to see all the things I was doing and thinking from 365 days in the past. Timehop does a similar job, but across lots of social media. I like the continuous, day-by-day nature of it.

Also I think a little about Bob Shaw’s concept of slow glass which is glass that is so opaque that light takes as long as ten years to pass through it. From a practical standpoint, then, if you looked through a window made of slow glass, you’d see events that took place outside that window ten years ago.

I would like a slow savings account.

A slow savings account would work exactly like a regular account – I could pay money into it, and transfer money out. The difference would be: when I pay money in to a slow savings account, it appears in the available balance exactly one year later.

Additional slow savings models might include:

  • Continuous partial pension. A pension doesn’t start at a fixed date, but is paid continuously over my entire life. I pay into it, and it pays me a very small amount every month (which, of course, I could use to pay back into my pension, deciding to feed the present to the future). This would give me a direct and visceral sense of the strength of my income as a 65 year old - having income of just 10 bucks a month from my continuous partial pension would certainly make me want to contribute more to it - and also gradually raise my safety line, the minimum level of income to which I am able to fall. A higher safety line lets me take more risks to find happiness and/or wealth, which is the advantage had by people from rich backgrounds.
  • Spike smoothing. Whenever my current account balance spikes above a certain threshold, the surplus is taken and distributed evening over the next year. This achieves one of the functions of a regular savings account, in an automatic fashion.

A slow savings account would be the exact opposite of a credit card: it distributes present income into the future, instead of borrowing from the future; it deals with assets instead of liabilities; it encourages smooth spending instead of enabling large spike purchases; it raises the level of the safety net instead of raising the level of indebtedness.