Many people use the turning of the calendar as a chance to begin anew and make specific lifestyle improvements. This has probably never been truer than for those ready to leave 2020 behind.

Saving more money is always a popular New Year’s resolution, but it’s also one that’s often more challenging than expected. In fact, a 2019 poll found that nearly half of US adults made a New Year’s goal to save more that year, yet only half of the participants actually met their savings goal.

Given that 2020 likely left many Americans resolving to build up an emergency savings fund or restock a depleted one, here are five strategies to increase your odds for success this coming year.

1. The Magnificence of Significance

One easy, but often overlooked step is to make a more specific or meaningful resolution. Everyone knows we’re supposed to have an emergency savings fund. But a vague obligation can make it hard to remain motivated throughout the year. Instead, research shows that attaching significance to your saving or a reason why you save can improve your chances for success.

For example, instead of committing to “save more”, resolve to “save for emergencies so I don’t have to skimp on groceries for my family.” This personal significance motivates us to work harder towards achieving the goal.

Beyond a clearly articulated reason, make your resolution even more specific by defining the amount you’ll save, when, and how. Committing to “save to avoid skimping on groceries by putting $25 every pay period into a separate savings account” makes it much more concrete and therefore harder to ignore. The actual transfer can be easily scheduled using an online bank account or mobile app.

2. Make It Easier on Yourself

One scientific way to achieve higher speeds in a car is to reduce friction. Similarly, behavioral science shows that savers can better reach their goals by removing barriers or impediments to saving.

The profound imbalance between systems pushing you to spend and encouraging you to save, having to recall your savings intention each month, and manually transferring the money between accounts all create unnecessary roadblocks. To overcome them and reduce friction, make emergency savings automatic.

Many direct deposit programs allow you to split your payroll deposit into a checking account and a separate savings account. If you are unable to use direct deposit to split your income, schedule automatic transfers within your bank or credit union to move money from checking to a savings account.

If your income is variable rather than the same each pay period, then you may want to consider using a savings app such as Qapital that lets you define a percentage of your income (rather than a dollar amount) to automatically save towards emergencies.

3. Separate Buckets for Separate Jobs

Keeping emergency funds separate from your checking account is a critical first step. But a next level savings strategy is to open a second savings account distinct from general savings.

A second account for discretionary spending like a vacation or new vehicle only after you’ve put the money aside is a useful way to handle non-emergency needs. Holding funds separately lessens the chance you’ll justify dipping into the emergency fund for non-emergency purchases. And a label is a powerful deterrent!

Apps like Smarty Pig, Chime, and Digit or even your online banking account allow for the creation of multiple, named buckets.

4. Everybody Makes Mistakes

Critical to achieving our long-term goals is having the ability to recover when we slip up. Accept that we may sometimes make mistakes. Then identify what might take you off-track again and make a plan for how to avoid it or minimize the potential derailment.

Are you prone to overspending when you eat out? Then consider a commitment to decrease your entertainment spending by the same amount whenever that happens to continue making progress on your emergency savings goal. You can flag these mistakes by setting parameters within a personal finance app or simply by reviewing your credit card or bank statement each month.

Having a plan will make you feel more in control and more likely to recover from mistakes.

5. Rinse, Wash, Repeat.

It’s important to remind yourself that it’s okay to spend your emergency savings. The entire point of this account is to use it when you have a flat tire, doctor’s bill, or another unexpected expense.

The account allows you to avoid putting emergency expenses on costly credit cards, taking out a payday loan, or asking family and friends for support. So, when an emergency arrives, it’s wise to spend down your account.

The key is to then refill the account. Automated savings contributions sent to a savings account distinct from discretionary spending buckets will make it easy. Rinse, wash, repeat.

Margaret Bolton and Shanta Ricks are Behavioral Researchers in the Common Cents Lab at Duke University’s Center for Advanced Hindsight; the Common Cents Lab is funded by the MetLife Foundation and supported by Blackrock as part of BlackRock’s Emergency Savings Initiative.

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Take a moment and think about the most important financial decisions you make in your life: buying a house, investing for retirement, or saving for your kids’ education. For most of your life-altering financial decisions, you will likely have your spouse by your side. Making financial decisions with your loved one, however, is stressful. In fact, financial decisions can make or break marriages: finances are the leading cause of stress in a relationship, and the second leading cause of divorce in the United States.

Yet, despite the high stakes involved in making financial decisions with spouses, people often fail to seek out financial advice. In the Survey of Consumer Finances conducted by the Federal Reserve, only 29% of households reported receiving advice on investment and borrowing decisions. Moreover, a study using data from the American Life Panel discovered that only 18% of respondents reported asking for retirement and investment advice. Research indicates that financial advice can effectively improve financial well-being, as it facilitates better goal-setting.

Given the benefits of financial advice on one hand and the difficulty of seeking advice on the other, we were curious to explore the following question: can we get couples to seek out financial advice?

To answer this question, we asked 757 married respondents to allocate their monthly household income across a variety of categories, including food, housing, debt, and saving. We randomly assigned participants to one of two conditions. People in the first condition were asked to think about how they made financial decisions alone in the past month, while people in the second condition were asked to think about how they made those decisions with their spouse. After they allocated their budget, we then asked participants whether they would like to make an appointment with a financial advisor to review their allocation.

We found a surprising result: while our manipulation did not impact how participants allocated their money across the different categories, it did impact the likelihood of seeking financial advice. Participants who were primed to think about their spouse were 25 % more likely to seek out financial advice.

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Our results indicate that people are more likely to seek financial advice when they are asked to think about their partners. While it’s still too early to conclude where and how we should offer financial advice to couples, prompting people to have their partners in mind could in itself be a solid first step towards seeking financial advice. Advice to couples: next time you make a financial decision, take a moment and think about your loved one first.

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San Francisco, Calif. and Durham, NC – March 1, 2018 – Common Cents, a financial research lab at Duke University supported by MetLife Foundation, today unveiled its 2017 Annual Report. The report details behavioral interventions aimed at improving financial health for low- to moderate-income people with more than 27 organizations over the course of 2017, including startups, credit unions, non-profits, and local governments.

The report constitutes one of the most significant applications of behavioral economics of its kind, documenting outcomes and lessons from 38 different projects and experiments. The work is part of a three-year effort supported by MetLife Foundation to improve the financial well-being of low-to-moderate income (LMI) households in America.

“The work of Common Cents clearly demonstrates that behavioral science can meaningfully help people save more and spend less,” said Evelyn Stark, Assistant Vice President of MetLife Foundation.

“Everyone aims to be financially stable, but we know that not everyone has the right decision-making environment to accomplish this goal,” said Common Cents founder, Behavioral Economics Professor, and New York Times bestselling author Dan Ariely. “Our work shows that by optimizing the environment, it is possible to build products and services that improve financial health, all while making the business more economically viable.”

Despite historic peaks for the S&P 500, low unemployment, and a decreasing poverty rate in 2017, the personal savings rate for Americans is at its lowest point in five years and credit card debt exceeded $1 trillion for the first time since the Great Recession. Set against this backdrop, Common Cents set out to help organizations build products and services that leverage basic human behaviors to increase income and savings, improve cash flow management, and decrease expenses and debt.

Examples of the lab’s findings and impact from the 2017 report include:

Default Retirement Saving Outside of Work:

Common Cents partnered with Self-Help Credit Union to increase retirement savings outside of an employer-sponsored program. Common Cents automatically opened a retirement savings account for new checking account holders who weren’t already saving for retirement. Anytime members received a deposit into their checking account, a portion would also be placed into this savings account. In the pilot, roughly 38% of eligible members decided to enroll in the retirement savings program, and over 30% of members have kept their account active.

Increase Saving by Appealing to Round Number Preferences:

In partnership with Latino Community Credit Union, Common Cents defaulted borrowers into a program that rounded up loan payments to the nearest $25 or $50. The extra payment went to a savings account that the borrowers could access anytime. The program earned a 26% enrollment rate. By reframing the opt-out box to highlight the potential missed savings, this enrollment rate increased to 38%.

Reduce Food Spending Through Peer Comparisons:

In an analysis of over 30,000 transactions, Common Cents found that eating out was one of Americans’ most regretted expenses. To help reduce these costs, Common Cents partnered with Arizona Federal Credit Union to show members how much they spent eating out compared to other members. Correlational evidence shows that these peer group insights might help to curb food spending in the short-term.

Use Natural Milestones as Motivations:

Common Cents partnered with Silvernest, a roommate matching service, to help older adults earn extra money by renting out a spare room. People are motivated to make a change when there is a natural milestone, like the New Year or turning 65. Utilizing this intrinsic motivation, click-through rates on Silvernest’s online ads doubled when they highlighted to 64 year olds that they would soon be turning 65.

Since its launch in 2016, Common Cents has conducted 57 pilots and experiments involving over 1.7 million individuals. To date, our work has led to $11.5 million in increased earnings, savings, and expense reductions. At scale, we expect our impact to grow to $113 million.

For detailed results of every 2017 intervention, to review a copy of the Annual Report, or to read more about participating partners please visit: https://advanced-hindsight.com/partnership/

About Common Cents

Common Cents Lab, supported by MetLife Foundation, is a financial research lab at the Center for Advanced Hindsight at Duke University that creates and tests interventions to help low-to-moderate income households increase their financial well being. Common Cents leverages research gleaned from behavioral science to create interventions that lead to positive financial behaviors. The lab is led by Behavioral Economics Professor Dan Ariely and is comprised of researchers and experts in product design, economics, psychology, public policy, advertising, business administration, and more.

To fulfill its mission, Common Cents partners with organizations, including fintech companies, credit unions, banks and nonprofits that believe their work could be improved through insights gained from behavioral economics. To learn more about Common Cents Lab visit www.commoncentslab.org.

About MetLife Foundation

MetLife Foundation was created in 1976 to continue MetLife’s long tradition of corporate contributions and community involvement. Since its founding through the end of 2017, MetLife Foundation has provided more than $783 million in grants and $70 million in program-related investments to organizations addressing issues that have a positive impact in their communities. In 2013, the Foundation committed $200 million to financial inclusion, and our work to date has reached more than 3.5 million low-income individuals in 42 countries. To learn more about MetLife Foundation, visit metlife.org.

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Press Contact:

Michael Azzano

Cosmo PR for Common Cents Lab

415/596-1978

michael@cosmo-pr.com

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Over the last few years, the Common Cents Lab has designed and run multiple experiments that infuse the best practices for VITA programs with insights from behavioral science. We are sharing the best of what we’ve learned about getting more people to use VITA and getting more VITA participants to save in our new report, “Behavioral Solutions for VITA Tax Providers.”

Each idea we highlight comes with pre-designed materials for you to use. All you need is the logo.

Interested in what we think works? Check out our report.

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Millions of Americans operate primarily in a cash economy. These individuals not only carry greater risk in storing their money, but also miss out on the potential benefits of savings products. This is true of a high percentage of members at the Latino Community Credit Union (LCCU), established in 2007 to serve Latino communities of North Carolina. Approximately 18% of all LCCU members walk into credit union branches with the purpose of cashing a check. The credit union targeted this problem to increase their members’ security and engagement with the credit union.

 To encourage more people to deposit part of their checks into an account, the Common Cents Lab partnered with LCCU to create check-cashing slips. Originally, LCCU’s process to cash a check was simpler than the process to make a deposit; deposits required members to fill out a slip, while cashing did not. Even a seemingly small hurdle can influence people’s decisions, so the greater convenience of cashing checks works against encouraging members to deposit some of their funds. Our suggestion to add a slip was not exactly exciting to LCCU – no one says “I know what customers want – more forms!” – but we emphasized that the existing process was encouraging the wrong behavior and pressed them to test this idea.

Tellers at LCCU were given randomized stacks of check-cashing slips to test different behavioral concepts. In addition to the “control” (a sheet of paper that indicated the member should not get a slip), there were three treatment slips:

• A “default” slip with the option to deposit 50% of the check selected
• The same “default” slip with a “risk waiver” on the back to highlight the potential loss of funds if the check is cashed
• An “easy check cashing” slip encouraging members to deposit a multiple of $10

Tellers provided the slips to members when they asked to have their checks cashed. Members were instructed to fill out the slip, and tellers provided help when necessary. Slips were provided in both Spanish and English depending on members’ native language.

While we only observed nominal differences among the three different types of slips, we did see a significant difference in deposit rates between having a slip and having no slip (the control). Almost 10% of customers who were given any kind of check-cashing slip made a deposit into savings – and on average, those deposits were $169! If LCCU rolled this out at all of their branches, we estimate they could help their members save $2.1 million per year and ultimately ensure greater financial security. This increase in deposits could ideally also lead to greater engagement with other credit union products, like long-term savings accounts or loans.

Almost 10% of customers who were given any kind of check-cashing slip made a deposit into savings – and on average, those deposits were $169!

While we often urge organizations to remove friction that impedes positive action, in this instance we added friction to prevent people from taking the wrong action. Sometimes people are seeking big, revolutionary changes to help address their problems, but this test proves that small tweaks can have powerful impact – and low costs to implement, too.

Maura Farver is a Senior Behavioral Researcher at the Center for Advanced Hindsight. She holds a Master of Environmental Management degree from Duke’s Nicholas School of the Environment and an MBA from UNC’s Kenan-Flagler Business School. Her research focuses on behavior to increase financial well-being and she is also interested in environmental health behavior.  Maura can be reached at maura.farver@duke.edu.

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This year, the Common Cents Lab at CAH is partnering with two Children’s Savings Account (CSA) programs in the U.S. With our first experiment finished and several more under way, read up on what we’ve found and how we think behavioral science can be used to help low-income families save for college.

Children’s Savings Accounts are a recent innovation in the world of asset building and already demonstrate unique promise for bridging inequalities in education. From preliminary studies with a CSA program in Oklahoma, parents randomly assigned to receive $1,000 in a CSA at birth showed increases in college expectations for their children.¹ These improvements in college expectations have been linked in separate studies to improved academic performance and increases in college enrollment.²³ However, since most CSA programs are relatively young, the scientific jury is still out on how to best structure and administer these programs to help low-income families save for college.

Our approach assumes that low-income populations are capable of saving, but have unique challenges beyond a sheer lack of funds.

To contribute to this growing body of research, we partnered with two CSA programs – the St. Louis Treasury’s College Kids program and the Wabash-based Promise Indiana program – to promote college savings in low- to moderate-income populations. From an initial phase of exploratory research, we identified several important barriers to saving. Our approach assumes that low-income populations are capable of saving, but have unique challenges beyond a sheer lack of funds. For example, qualitative interviews with Kindergarten parents, conducted as part of our initial exploration, revealed that they did not think it was typical to start saving for college while their kids were in elementary school – they felt that college was too far away or were not yet certain their kids would go to college. Preliminary data also revealed that parents contributed to CSAs at the end of the school year in order to reach the deposit amount that would earn them a matched contribution. This evidence suggests that factors such as timing and social norms can be powerful in determining whether or not families will save for the future, regardless of the known benefits of saving.

In our first experiment with the College Kids program, we wanted to address the barrier of perceived distance to college with the hypothesis that, as college feels closer, parents will be more likely to start saving. To make college seem closer, we sent families variations of an end-of-year account statement. Half of the statements included a visualization showing them how close their child is to college.

We also tested if the way the message was sent home would impact how parents responded. To do this, we sent some of the statements home by mail and some through the child’s backpack, giving the kids a sticker to wear saying they wanted to go to college in the future.

The results of this first experiment were modest, yet promising; we found that families who saw this visual prime and received the statement via their child’s backpack were more likely to make deposits into their account. While these small tweaks seemed to nudge savings for some, only 65 families made deposits into their accounts out of the nearly 4,500 that were included in the test.

What should we make of these small effects? To start, there are many more barriers to address when it comes to college savings in low-income populations, including issues around limited trust in – and access to – financial institutions. In future studies, we plan to test stronger primes to make families feel more compelled to start saving for college as early as possible, for example, by suggesting a new social norm or creating the perception that time is moving more quickly, all while working to improve structural issues around access. We’ll also aim to make account use as automatic as possible by using behavioral strategies to help parents set up small, recurring deposits which will compound over time. While small program changes show initial promise in bridging the savings gap, our future research efforts will dig deeper into the roots of the problem to develop more impactful and scalable interventions.

¹Kim, Y., Sherraden, M., Huang, J., & Clancy, M. (2015). Child development accounts and parental educational expectations for young children: Early evidence from a statewide social experiment. Social Service Review, 89(1), 99–137.

²Singh, K., Beckley, P., Trivette, P., Keith, T. Z., Keith, P., & Anderson, E. (1995). The effects of four components of parental involvement on eighth-grade student achievement: Structural analysis of NELS-88 data. School Psychology Review 24(2), 299–317.

³Cook, T. D., Church, M. B., Ajanaku, S., Shadish, W. R., Kim, J. R., & Cohen. R. (1996). The development of occupational aspirations and expectations among inner city boys. Child Development, 67(6), 3368-3385.

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San Francisco and Durham, NC – Feb. 8, 2017 – Common Cents, a financial research lab at Duke University and supported by MetLife Foundation, today unveiled its 2016 Annual Report.

Annual financial report

The report details findings from seven completed behavioral intervention programs and ongoing research begun in 2016.  The work is part of Common Cent Lab’s three-year effort to improve the financial well being for 1.8 million low-to-moderate income (LMI) households in America.

Common Cents is one of the first to use social science field experiments within financial organizations for the purpose of gaining scalable behavioral insights that can improve Americans’ financial decision-making. The 2016 Annual Report enables companies and financial service providers to better understand the actions of modern consumers in an era of changing workforce trends and new financial tools.

“Many times, companies build products without a full understanding of human behavior. At the same time, academics arrive at novel theories that may be too difficult to drag and drop into a business model,” said Common Cents founder, Behavioral Economics Professor and New York Times bestselling author Dan Ariely. “We are trying to bridge the gap between academia and industry to produce actionable and scalable behavioral insights that increase savings, eliminate debt and extend consumer benefits in a way that are economically viable for business.”

In a baseline study of LMI participants, Common Cents found that 36% self-reported having less than $500 in savings (including retirement savings). Yet 92% of respondents listed three or more specific actions they could take to improve their financial security. Common Cents helps to bridge the gap of this Intention/Action gap by focusing on interventions within five core areas:

• Improving Cash Flow Management
• Decreasing Expenses
• Managing Debt
• Increasing Short-Term Savings
• Increasing Long-Term Savings

The Common Cents approach to designing financial interventions is informed by a three-step process for behavioral diagnosis that includes identifying the specific and desired key behaviors, removing the barriers impeding that behavior, and then amplifying its benefits of that behavior.

Common Cents created and executed its 2016 interventions in partnership with 17 fintech companies, credit unions and financial services organizations of different types and sizes, in addition to specific experiments conducted within the lab.

For example, EarnUp is a loan management company that partnered with Common Cents to identify the role of psychologically satisfying numbers in paying off loans faster. Rounding increased the number of people who chose to overpay by approximately 40%, saving an average of $8,000 each in interest and shortening their loan term by two years. Common Cents estimates that all participating users could total $1.25 million in interest savings through this one simple change.

“Common Cents is a vital partner in helping us understand how to help consumers take back control of their financial lives,” said Matthew Cooper, co-founder of EarnUp. “Their process is at once visionary and practical, showing us how to simply and efficiently motivate Americans to dramatically pay off loans faster and more affordably.”

Other example partners and interventions from the 2016 Annual Report include:

• Digit: Nearly doubled tax time savings with SMS for this mobile savings app;
• Propel: Modified the mobile app view to extend longevity of food stamp benefits for SNAP recipients;
• Community Empowerment Fund: Increased savings deposits using punch-cards;
• Payable: 14.5% increase in the number of independent contractors clicking to begin retirement saving by reframing their perception of wages.

Once complete, each of the 2016 interventions was rigorously tested and measured for impact before publicly sharing the results. Through these interventions, in combination with ongoing research, Common Cents expects its programs, when fully rolled out, to have a direct positive impact on 465,000 LMI households.

“MetLife Foundation is proud to fund Common Cents and its behavioral intervention work,” said Evelyn Stark, Assistant Vice President, MetLife Foundation. “It is exciting to witness this unique application of behavioral economics in financial technology to measure the outsize impact these small changes can have for consumers. We look forward to collaborating with Common Cents to continue to improve financial decision making.”

Common Cents will soon announce the newest participants in its 2017 partner programs. They will continue their focus on the five core areas, with a specific emphasis on short-term savings and cash flow management.

For detailed results of each 2016 intervention, to review a copy of the Annual Report, or to read more about participating partners please visit: https://advanced-hindsight.com/commoncents-lab/share-our-findings/.

About Common Cents

The Common Cents, supported by MetLife Foundation, is a financial research lab at the Center for Advanced Hindsight at Duke University that creates and tests interventions to help low-to-moderate income households increase their financial well being. Common
Cents leverages research gleaned from behavioral economics to create interventions that lead to positive financial behaviors. The lab is led by famed Behavioral Economics Professor Dan Ariely and is comprised of researchers and experts in product design, economics, psychology, public policy, advertising, business administration, and more.

To fulfill its mission, Common Cents partners with organizations, including fintech companies, credit unions, banks and nonprofits that believe their work could be improved through insights gained from behavioral economics. To learn more about Common Cents Lab visit advanced-hindsight.com .

About MetLife Foundation

MetLife Foundation was created in 1976 to continue MetLife’s long tradition of corporate contributions and community involvement. Since its founding through the end of 2016, MetLife Foundation has provided more than $744 million in grants and $70 million in program-related investments to organizations addressing issues that have a positive impact in their communities.

Today, the Foundation is dedicated to advancing financial inclusion, committing $200 million to help build a secure future for individuals and communities around the world.

To learn more about MetLife Foundation, visit www.metlife.org.

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Webinar: DEC 1ST, 2016, 12:00PM PST

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