And then you lose money through inflation. I'm not saying it can't be done I'm just saying it's stupid.
I totally agree. Also, depending on your ethical stance towards what the government is doing with that free loan you’re giving them, it’s arguably immoral.
Nonetheless, there are vast swaths of the working poor who are shut out of mainstream financial institutions. Further, behavioral economics suggests that “savings behavior” (regardless of interest / efficiency) is most effectively achieved when it is easy, automatic, and not cognitively burdensome. From this perspective, whatever this strategy of “structured withholdings” sacrifices in profit maximization / efficiency, it definitely compensates in other ways to make it a viable savings vehicle for the working poor.
It’s definitely not ideal but neither is being so poor that you’re shut out of easy, safe, and profitable savings mechanisms. As much as it pains me to say it, I can (at least) sympathize with the strategy.
Corporations are people, my friend.
—GOP presidential contender Mitt Romney, on why the U.S. shouldn’t raise taxes on corporations to shield Social Security and Medicare from cuts. “Everything corporations earn goes to people,” he told the audience. (via officialssay)