Personal savings, family and friends are typically the sources of funding for a small business startup. But as a business grows, access to capital becomes a major factor and bank credit remains the most widely used type of financing.

Full story available to subscribers only.
Log in | Subscribe
Already a subscriber? Activate

Battered by low incomes and high debt, fewer young adults aged 18 to 34 are trying to save, the Consumer Federation of America reported Monday.

CFAs America Saves project found in a poll that the percentage of 18- to 34-year-olds trying to save has dropped from 66 percent to 57 percent in the last year, while those who have a personal interest in savings declined from 77 percent to 68 percent.

Although he gave possible reasons for the drop off, CFA Executive Director Stephen Brobeck called it unexpected.

The growing lack of interest in saving by 18- to 34 year-olds is a departure from Americans as a whole, who saw the same level of personal interest in savings (71 percent) and effort in personal savings (62 percent) in 2014 as in 2013.

To increase savings by adults on their first jobs, America Saves is advocating auto-enrollment for a separate account to handle emergency and short-term financial needs as well as an opt-out retirement plan.

The poll was of 1,000 adults nationwide in September.

The American Savings Promotion Act (HR 3374), a bipartisan bill passed by the House of Representatives this week (yes, it does sometimes happen) could lift economic mobility in America by boosting savings, especially in lower income neighborhoods. The bill removes legal impediments to banks and thrift institutions offering prize-linked savings products (PLS). Theres a companion bill awaiting action in the Senate.

Building personal savings is a critical element in moving up the economic ladder. A cushion of capital can tide a household over a setback, such as unexpected health costs, and help mobility in a positive way, such as moving across town for a better job. Developing the habit of saving, even in a small scale, is connected to other positive behaviors, such as completing college.

The Savings Habit: A Post-War British Story

The savings habit is often picked up early. Like most Britons brought up in the 1950s, my rural public elementary school had a savings club and I dutifully made deposits from my pocket money. Everyone did. Heres my card:

Saving was therefore an expected and reinforced habit that was practically grafted into my DNA and remains with me.

The American Savings Gap

But we also know that fewer Americans are in the savings habit today. The most troubling feature of the wealth gap is that modest-income Americans save little or nothing. So what can we do to increase savings among lower-income households? We can give new financial incentives for savings, which appeal to the rational left side of the brain. But we need more emotional, right brain approaches too.

All Should Seek Prizes (For Saving)

Prize-linked savings (PLS) accounts aim to entice people into saving more. Unlike traditional savings accounts, which now pay out a fraction of one percent interest, institutions offering PLS pool the interest from all accounts, hold a drawing and distribute the accumulated interest as prizes, from a few dollars to a million or more. It appeals to the gamblers instinct, like a lottery. But unlike a lottery, a loser still ends up with a bundle of savings.

PLS accounts have a long history and there are versions in several countries. The United Kingdom has been a leader, establishing national premium bonds in 1957, dubbed savings with a thrill. The bonds pay no interest, but each year bond-holders have chances of winning from the equivalent of a few dollars to about $1.5 million. Roughly one-third of Britons own the bonds, with a disproportionate number of modest-income individuals and first-time savers as bondholders.

Moving to Prize-Linked Savings

Some US states have opened the door through state laws that permit credit unions to open PLS accounts. For instance, in 2009 a group of Michigan credit unions established Save to Win accounts, with monthly prizes ranging up to thousands of dollars, that successfully attracted non-traditional savers. Federally-charted financial institutions have so far been prevented from offering PLS accounts by unduly wide statutes and regulations, aimed mainly at organized crime. The new bill would curb the impact of those laws and enable PLS accounts to flourish. Lets hope the Senate follows suit.

The pupusas that got their start at the Boulder County Farmers Market six years ago now are a national brand.

Boulder-based Tres Pupusas, through its Tres Latin Foods division, have turned the homemade pupusas into a frozen food line. It is selling the Salvadoran stuffed masa cakes in nearly 400 stores across the United States. And the company is in the position to more than double that store count in the coming year, co-founder Cindy English said.

The expansion comes a few months after Tres Latin Foods signed on with a Chicago-based sales team. Prior to late last year, the company had been testing the waters with Whole Foods.

Last year we had to make the decision of whether to stay small, pretty much do farmers markets or launch nationally, English said.

Tres Latin Foods signed on with a Denver-based co-packer and started distributing to a wider retail base about 60 stores.

We got a lot of positive feedback, she said.

Other regions around the United States took to the varieties of pupusas flavors such as spinach and cheese, and pinto bean and cheese and, especially, the vegan variety, English said.

The vegan black bean and sweet corn variety is the companys No. 1 seller, she said.

In addition to expanding distribution, Tres Latin Foods plans to launch four products in March, bringing on two meat-filled pupusas and two breakfast pupusas, she said.

To do so, the company plans to take on outside capital.

Up until now, we funded it through Tres Pupusas farmers market sales and personal savings, she said.

Tres Pupusas expansion comes amid continued growth in the natural and organic frozen food category.

Natural and organic frozen foods are expected to generate $1.83 billion in revenue this year, a 15.5 percent increase from the year before, according to the Nutrition Business Journal. Those projections come as the overall frozen food category likely could hit $8.62 billion in sales, a drop of 2.6 percent from 2013.

Contact Camera Business Writer Alicia Wallace at 303-473-1332 or This email address is being protected from spambots. You need JavaScript enabled to view it..