The Piggy Bank Factor

America's latest endangered species: the piggy bank

In the days before credit and debit cards, pretty much everyone had a piggy bank or an empty mason jar sitting on a shelf at home. A depository for spare change at the end of the day.

Not anymore.

In today's world of plastic transactions, we're hard-pressed to hear jingling pocket change as people pass us on the street. Myself, I try and pay for everything on one credit card: groceries, gas, restaurants. Not only is it practical but I get a detailed list of all my purchases on one convenient bill at the end of the month.

America's most valuable real estate

Piggy is an endangered species for another reason: competition. Disposable and discretionary income is being diverted from the bottom of Piggy's ceramic belly to frivolous and unnecessary impulse purchases made at point of sale retail terminals.

The most valuable real estate in America is not found on Fifth Avenue or Rodeo Drive; it's the space around America's cash registers. Studies have shown that the square footage immediately surrounding point of sale generates over 300% more in revenue than any other part of a store.

A multi-billion dollar industry devoted to the pursuit of exploiting point of sale impulse purchasing has flourished over the past 30 years. Color schemes, eye level placement, display content, and a myriad of other variables are continually studied, tested and refined. The sole objective of this Science of Purchase is to determine how a retailer can most effectively bleed the consumer of his last nickel when experiencing the most crucial – and most vulnerable – part of the retail transaction: paying for merchandise at point of sale.

It is difficult to track and place an actual dollar figure on what Americans spend on candy bars, tabloids and other eye-catching merchandise skillfully and cunningly placed around your convenience store's cash register. However, thanks to statutory requirements, there is one category of impulse purchase that we know to the cent how much Americans waste their hard-earned dollars on: lottery tickets.

Over $45 billion was spent on lottery tickets in the United States last year, purchased through 187,000 retailers (of which 133,000 have on-line lottery terminals). 50% of all Americans played the lottery at least once last year. Contrast this with the less than $37 billion a year spent on the positive and beneficial Individual Retirement Account, contributed to by less than 10% of eligible taxpayers.

With this kind of competition for America's spare change, what's a piggy to do?

Piggy is frustrated

I contend that the very same piggy bank factor responsible in decades past for filling up ceramic and tin vessels with America's spare change still exists today. This predisposition to save small amounts on a daily basis, this tendency to squirrel away for a rainy day is, I believe, still very much a part of everyone's psyche.

Weren't we all taught from an early age that it's good to save? And don't we feel good when we do it?

Piggy hasn't gone away; he's just frustrated. Today's retail environment doesn’t provide an outlet for our predisposition to incremental saving to be expressed. Indeed, I am convinced that the piggy bank factor is just waiting for a channel through which it can be satisfied.

Investing as impulse purchase

Why not use the very same technology that diverts our spare change away from savings? Why not convert the millions of cash registers, lottery machines, and credit/debit card swipers into having the capability to take spare change and direct it into our own mutual fund or IRA accounts? If manufacturers can make devices that allow us to so conveniently and easily play lotteries then, certainly, the ability to invest via the same technology isn’t out of the realm of possibilities.

I would like to see stock market investing placed on the same level playing field as the impulse purchase. Investing as an impulse purchase should become as common as lottery ticket purchasing.

The cash register at your local supermarket should be reprogrammed so that the next time you're at the checkout counter and you get a dollar or two back in change you can instruct the cashier to deposit that change – using the cash register – directly into your own investment.

If state legislatures have seen fit to encourage and promote legalized lottery gambling, I believe they have an obligation to provide a positive choice directly at lottery point of sale. Imagine the next time you're at a lottery kiosk wagering $5.00 on Powerball and the cashier says: “Mr. Consumer, you now have a choice. You can put your hard-earned $5.00 on the futility and randomness of a lottery ticket…or…you can contribute to this year's Roth IRA. What do you want to do?”

Barriers to equity investing

Certain identifiable minorities have historically been underrepresented in stock market ownership and overrepresented in impulse purchasing. One of the barriers to higher participation rates in stock market ownership by minorities is minimum amounts, such as $5,000 or $10,000, required by financial institutions just to open up an investment account, something many members of minority and low-income communities simply can't or won't do. By contrast, the unit price of $1.00 has never been a barrier to playing the lottery.

Equity investing should be made just as easy.

April 4, 2005