Stories | July 29, 2010

When reminders can make you rich

Reminders can help boost the amount people save, a new study suggests.

And the incentives to put money away work particularly well when they relate to a future goal, such as saving for a concert or school fees.

The findings are published in the Getting to the Top of Mind: How Reminders Increase Saving paper says. It has just been published by the National Bureau of Economic Research (NBER).

Wiping out the "I forgot" savings excuse
The researchers - based at Yale and Harvard universities and Dartmouth College in the United States - set up an experiment in which some account holders received reminders to save by text message or letter, with some sent reminders highlighting their savings goal. A third group received no reminder.
They found reminders increased the likelihood of reaching the savings target by 3% and upped the total amount saved by 6%. Reminders referring to specific goals were "two times more effective than reminders that did not mention the goal", the paper says.

Lessons for savers
eZonomics believes the experiment highlights important lessons for savers: 

  • Name your account: If you're saving for a Rolling Stones concert, calling your account One Night With Mick Jagger could encourage you to not miss a payment
  • Consider setting up automatic payments: Having payments go into a savings account is a simple way to ensure you won't "forget" to save.

For more long term savings tips, see the eZonomics video I can't possibly save that much.

eZonomics team
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InvestingSavingPersonal financeGoal settingNudgeReminders

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