COMMON CENTS LAB

Draw attention to important but less urgent priorities to overcome tunneling

We have so many competing priorities for our time and attention, that it can be difficult to stay on top of everything we need to do to become financially well. Organizations can use well-timed messaging to make sure users don’t let these things fall by the wayside.

One of the most critical elements to achieving financial well-being is to have some savings available for emergency expenses. We drew users’ attention to this critical priority across several different organizations. For example, in an experiment with Qapital, we found that a prompt about emergency savings during user onboarding more than doubled the number of users that created an emergency savings goal. Similarly, at a credit union, we prompted members to set up a Rainy Day Savings Accounts, with about a quarter of the members taking up the offer. In the area of retirement savings, we highlighted the importance of maintaining retirement savings accounts with a message on the Ascensus user home screen to encourage users to use their retirement savings projection tool.

We’re also continuing to capitalize on the success of prompts in the designs of new interventions. For example, we have designed a pop-up for Inclusiv member credit unions to prompt members to set up automatic transfers into an emergency savings account. And we’ve incorporated a prompt for users to set up emergency savings as a key step toward financial wellness within the financial technology company MX’s FinStrong app, a feature which is expected to launch in 2021. In Mexico, working with fintech Albo, we also co-designed a digital pocket, “Espacios”, to encourage their customers to save for emergencies.

In an experiment with Qapital, we found that a prompt about emergency savings during user onboarding more than doubled the number of users that created an emergency savings goal.

Additionally, we are providing reasons for households to take action on these important but not urgent tasks today. In Mexico, working with credit repair company Cura Deuda, we designed an intervention where users who made their debt payments on time, entered a contest to get a chance to have their debt repaid in full. In Turkey, where credit card usage is rapidly growing, we are working with Findeks to find ways to help users pay their debts on time so they can improve their credit scores.

Automate tasks to restore cognitive bandwidth

Keeping track of everything in a complex environment is hard. It’s even more challenging for LMI households who faced some of the greatest hardships caused by the pandemic, like reduced income paired with higher expenses. On top of all of that, scarcity adds its own tax on cognitive bandwidth. Automating financial behaviors can help lighten the load. We’ve helped make saving money for the short term easier with automation; the prompts mentioned above for Qapital, a credit union and Inclusiv all connected users to one-time set-ups for on-going transfers into savings. We are also looking at how to improve take up of the Split and Save product at Park Community Credit Union, which will allow users to automatically save a portion of large electronic deposits into their account; our intervention will look at immediate versus delayed action and the use of a default recommended savings percentage.

Automation is also valuable in the loan repayment space, to help users maintain good credit. At Beneficial State Bank, we found that texting people a form to align their automatic loan payments with their pay cycle doubled the uptake of the payday-payment alignment. We’re also working with fintech Colendi to encourage borrowers in Turkey to make their utility bill payments through their app.

At Beneficial State Bank, we found that texting people a form to align their automatic loan payments with their pay cycle doubled the uptake of the payday-payment alignment.

When automation of some financial behaviors is not feasible, then reminders can be an effective alternative. For example, with the nonprofit financial planning firm Justine Petersen, we are currently testing text reminders to encourage timely loan repayment by small business owners. At a credit union, we are trying a variety of communication methods – from emails to refrigerator magnets – to increase borrowers’ on-time loan payments. In a separate experiment with a credit union, we are pairing payment reminders with offers of financial counseling. In China, we are designing interventions to increase earnings and decrease medical expenses among low-income patients by prompting them to enroll in a medical expense reimbursement program.

Provide scaffolding to simplify complex decisions

People often benefit from tools to help them make sense of the complexity in their finances. In a financial health assessment with Washington State Employees Credit Union (WSECU), we help members prioritize what part of their financial health they should focus on first; we are comparing how numerical or descriptive scores help users understand their financial well-being and encourage members to take action for improvement. At credit counseling provider MMI, we are testing a new way for counselors to interact with clients, focusing on empathy, expertise and social norms, to encourage clients to complete debt counseling. At Schools First Credit Union, we are testing how best to use rules of thumb in communications to members to get them to pay down debt more quickly. We are also helping people understand when they need to make corrections to spending with asymmetric feedback with Branch.

Some complex decisions carry additional weight because they are hard to correct if we make the wrong choice. At Alight, we are testing a timely prompt to help people understand the long-term financial trade-offs of making hardship withdrawals from workplace retirement accounts. This prompt is meant to provide a moment of deliberate thinking around a crucial decision that may lead people to decrease withdrawals from their future self. At Patelco Credit Union, we created a calculator for their credit builder loan to help members understand the true cost of their loan payments without stretching their budgets too thin.

At Digital Federal Credit Union, we guided members to put reductions in loan payments from loan modifications or consolidations towards savings.

We also recognize that finding money in tight budgets for savings can be challenging, so we recommended that people use unexpected windfalls to jumpstart savings. At both WSECU and Digital Federal Credit Union, we guided members to put reductions in loan payments from loan modifications or consolidations towards savings. At Virginia Credit Union, we similarly, redesigned the redemption portal to encourage members to put their credit card rewards towards savings.