Focusing on Savings: Reminders Help
The Wall Street Journal today reports on a study by economists that found that a simple reminder by cellphone encouraged people to save money, boosting savings rates by 6 percent.
The researchers, working with several banks the Philippines, Peru and Bolivia, randomly selected people who had recently opened savings accounts. Some were sent letters, others text messages, urging them to save, in both positive and negative terms. One message in the Philippines warned: “If you don’t frequently deposit into the Gihandom Savings account, your dream will not come true.”
What I found most intriguing about the study was an upbeat or scolding tone didn’t make a difference; what did was reminding the account holder of their goals, as well as the incentives offered by the bank for making consistent deposits.
In a recent Yahoo!Finance column, I covered research that suggests setting specific goals and then man- aging background cues to support those goals makes a difference in both academic and financial achievement. Prom- inent reminders can focus attention and help people stay on the path to their goals.
Concrete goals — with real price tags and real time frames — are critically important. Dartmouth economist Annamaria Lusardi has found that people who at least try to plan for retirement ultimately end up with more money than those who don’t make a conscious effort.
A few tips: Put a list of your financial goals where you can’t miss them — on the fridge or on the wall above your desk. Put a piece of masking tape on your debit or credit card and write your goals on it to prevent thoughtless spending. Recruit like-minded friends to support you in your efforts. And most importantly, automate your goals, so the money is swept electronically from your checking account into savings accounts (or into your 401(k) before you receive your paycheck).
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