We explore the implications of the theory of precautionary saving for the effect of financial innovation on the riskless interest rate. This theory implies that when marginal utility is convex, the presence of uninsured risk in the economy can lead to greater savings, and hence to a lower equilibrium interest rate, than would otherwise be the case. This suggests, in particular, that financial innovation should tend to induce an increase in the interest rate. We assess this argument, somewhat critically, and provide examples and a theoretical result which suggest that it is not a general phenomenon.