Stupidity and Hydrogen - "Stupidity is more plentiful than
Hydrogen and has a longer shelf life." - Frank Zappa.
The last few years have seen new products coming out from banks and
lending institutions that are changing the way we perceive savings and
investments. We've seen consolidated loans and 0% interest savings accounts,
20-year fixed-rate bonds and pension-secured mortgages. All this makes
it all that more important to know what you're doing when financing
so as to avoid costly mistakes. But lets stick to savings this week.
Credit where credit is due
Kudos for the bank that wants to help you and their marketing gurus.
They have managed to market a 0% interest savings account with penalties
for early withdrawal. When I heard about this, I thought that someone
had lost his or her marbles. I've always admired this bank's approach
to marketing their products but thought they had lost the plot on the
latest savings product. Time and consumers soon proved me wrong. People
have flocked to this product and I'm not sure if it is only because
of the parallel 'Live like a Millionaire' competition that has received
huge publicity. Again the marketing department managed to sell the sizzle
and not the burger. The prize is two weeks of a wonderful millionaire-type
lifestyle, not a millions bucks. Sizzle.
In essence, this savings account pays no interest with that mentioned
penalty on early withdrawal in exchange for a chance at winning a million
Rand each month.
Gambling and Savings
This very savvy marketing department understands that the average consumer
prefers a remote chance at winning a million Rand in exchange for the
interest they would normally receive from this type of account. Is the
banking customer so disillusioned with the interest received that they
would gladly forego this taxable income in the hope of the Big One?
Or is it just our innate need to take that gamble? Never mind Monte,
let's go down to the bank. I would love to have been there when this
idea was presented to the board. "Yes, we're asking them for their
money. No, we're not paying them any interest. Yes, it is like a lot
like gambling, but here they get their money back. Great, isn't it?"
Mrs Balls Chutney in Space
Watch this marketing department. I can't wait to see what they have
up their sleeve in connection with winning a trip to space. They have
great ideas and obviously know how to capture our attention and more
importantly our imagination and in this instance have proved that they
understand the man in the street a lot better than I do.
A bit like the lotto, I think, except your chances are a lot better,
a ticket costs R100, and you can get it back (with the required 32 days
written notice) if you so desire. Do I recommend it? As a savings vehicle,
anyone with a bond will receive much better interest savings by putting
it in his or her bond account. But if you want the chance at that million
bucks you 'gotta tatta' your money, 'tatta' your chance. As a friend
said: "You can't win if you don't have a ticket". Have you
got your ticket yet, or more importantly, would you open up a savings
account anywhere else?