Tips | November 10, 2014

Reminders, promises and three other “most important” nudges

Want to improve your money management? Here are our top five tips for effective nudges around personal finance.


A book called Nudge published in 2008 changed the way many people think about decision making. And co-author Cass Sunstein published a related essay in 2014 outlining what he says are the 10 most important "nudges". They include nudges relating to health, politics as well as money management. The original Nudge book is here.

Our favourites from Sunstein’s essay are:

1. Don’t forget One of Sunstein’s most important nudges is the reminder – an email or text message to remind the recipient to pay an overdue bill or top up their savings. He writes that a simple reminder can help people overcome procrastination as well as “simple forgetfulness”. Individuals can harness this power by creating their own reminders by setting calendar appointments or using dedicated apps.

2. Your records show… Showing people consequences of choices they have made in the past can influence what they choose in the future. Sunstein gives the example of spending on electric bills, writing: “The problem is that individuals often lack that information. If people obtain it, their behaviour can shift, often making markets work better (and saving a lot of money).” Time to dig out those old bills?

3. What happens if you do nothing The default option is what you are given if you don’t make a choice, explained on eZonomics here. Sunstein describes default rules as so powerful they “may well be the most effective nudges”. An example is defaulting to automatic enrolment to retirement savings schemes for workers.

4. I promise I will Setting goals can be a good first step but Sunstein writes that people often fail to fulfil them. One way to increase motivation and cut procrastination is a commitment device, he writes, including a specific action at a precise future moment in time. An idea to take it a step further is to make a bet with friends or family that you will achieve a certain goal by a certain time – or pay the wager.

5. Your neighbours do this If a neighbour gets a new car, research suggests people living around them will be more likely to want one too. This type of “social norm” can be used to influence the choices people make, writes Sunstein citing an example of people being told most people in their community pay taxes on time.

eZonomics team
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