Brindlewood bay does something similar with 'crowns'. That system just requires each character spend at least one crown per session. If it doesn't come up naturally during gameplay, it has you do a short vignette right at the end.

I usually give people an XP bonus for blue-booking (say, 2-16 pages) between sessions. It's not always canon, anyone may or may not read it, I may loot it for character beats, but you put in the effort, I'll reward that. It also cuts down on monologuing in session, which some players want to do, some really hate.

Adding anything to active character definition by points, I don't really do. In some games I have Luck which can be spent/bribe me to adjust a situation, get out of jail, find a contact, etc., but it has to be diegetically possible.

I have a similar-ish mechanic in Meteor, where you have "Undefined Skills" which you define on the fly. They're included for some similar reasons as you give, reduces analysis paralysis at character creation, gets the game running faster, and gives player a chance to suddenly declare they're good at something.

I've not really had issues getting players to spend them, but most of my playtests have been in one shots, so I might just be side stepping the hoarding problem. The other potential difference is that I'm usually running high tensions, life or death scenarios, so being able to say, "actually I'm Skilled at this thing" to avoid a difficult roll (or just be able to roll it better) is valuable enough that players will jump on the chance.

As for ideas to make players more likely to use them:

• Most of the benefits are longer term, if you make one, "reveal you're good at a thing right now," that might temp players. Or some other immediately impactful option.
• Auto-succeed or large bonus to a roll immediately on spending the point.
• A "use it or lose it" system. You get 1 per session (or 1 per in game unit of time/downtime). They don't roll over.
• Some combo of the above, pair a short term immediate benefit with a long term addition like it currently does.
  • For example, "My cousin Big Joan used to tell me all sorts of stories about hunting Mega-Weasels, that why I know their weak point is just below the jaw." The player has introduced their cousin, but also gets an immediate bonus to a roll, or reduction in TN (or however you system would handle such a thing).

Tie XP gain to riffing off of your story points. Making your story point relevant gives you bonus XP.

Let people change one out periodically as the game unfolds, with appropriate in game exploration, so that instead of being a limited resource, or a frozen moment of history, they always reflect the things that are important to that character in the moment

I found in DnD nobody ever uses inspiration during my games or rarely. When we switched to Pathfinder the same system is called Hero points I found it gets used all the time. I changed nothing about my games. Why is this? Both let you reroll a roll. In dnd you can gain up to 1 inspiration and you'll get it back whenever the GM rewards it to you. In Pathfinder 2e you gain hero points when the GMs rewards it to you. And everyone gets 1 hero point at the beginning of each session. Also you can have up to 3 hero points.

So being able to have multiple allows you to keep using them while saving one for an emergency. Gaining one every session at minimum allows you to plan ahead and manage the resource instead of hoping to get another one. Lastly having a cap makes it so you never want to end a session at the cap and Likely don't want to sit at the cap for long. The GM might soon reward you another point after all.

Maybe we can learn from this for your system.

I'd lower the starting amount to around 2 or 3 story points and use that as the cap. The players are instantly inventivized to spend them that way because they begin at the cap. Then set a predictable or at least semi predictable timer as to when a new point is gained. For example every x sessions. I think each session might be a bit too much. Finding the right value will take some experimenting. I can also see a variant where every character gains a story point when the group completes any minor or major quest or story arc. Additonally I like the idea of giving players a story point when completing a side quest related to their character backgrounds. That creates an 'exploit' where you can initiate a quest for yourself by using a story point to create an NPC or lore element for your PC which results in a quest. Then that quest results in a story point. Players will feel smart about this. And us GMs are happy we get player driven plots and story bits for free. Win win.

Is there a reason you are putting limits on defining facts like this? Most games I play have flexible GMs, and I define facts (both beneficial and detrimental) on the fly for my characters. Of course, making sure things aren't broken/stupid are up to you as the GM - ie: a player couldn't declare themselves as a king (depending on setting/tone), for example, but a prince or exiled royalty would be more likely.

If you do want to use points and/or want to maintain a balance, I would recommend the story point system in SWFFG - where a player can spend a lightside point to define a beneficial fact, which turns into a darkside point the GM can use to define a detremental fact later. That way, players get their points back, and the story gets more interesting overall.

Easy: institute a cap on how many story points they're allowed to keep. Get your 16th story point? Sorry, you can only hold 15. Rest goes away.

Of course, play around with the cap so it feels fair.

How about going the other way around, and instead of giving 5 points, each session every player earns one point up to a maximum of 5. Or maybe every two sessions if you think every session it's too much. Also I would say that in order to gain the benefits the player needs to give details, i.e. "I know someone on the court" is not good, but "One of the members of the court used to buy swords from my father, I've known him all my life". Finally an idea that I would do together with this is to increase the amount of things story points can do, and make stuff that costs multiple points (or really make the ones you have cost multiple points and give smaller ones that cost less) e.g.

• 1 point for having an acquaintance, (an ally would cost 2 or more depending on who is the ally and how powerful/helpful he is)
• 1 point for having a mostly useless skill/knowledge but that can help them at the time. e.g. I actually do know the exact distance to that city, I use to go there with my father every summer)
• 5 points to state a fact about the universe (if you're up for that on your game). e.g. Everyone knows that Orcs are allergic to Daisys.

You get the idea, and can possibly customize it to your world. The reason I think this would work is that:

1. It gives an upper limit, thus if the player doesn't use the points they lose them. But doesn't penalize them other than "you gain nothing"
2. It gives them options to think on solutions outside of the box, e.g. "can I think of a reason why my character would know how the sewage system of the city is planned?"
3. It allows players to keep doing things they liked, e.g. the player that has a large family can always have a cousin in every city they go instead of only 5, which would make him want to stick for dear life to the last cousin for a life/death situation.