Temporal Reframing and Retirement Savings

Hal Hersfield, Stephen Shu and Shlomo Benartzi
Working Paper
January 6, 2018

A growing percentage of American workers are now freelancers and thus responsible for their own retirement savings, yet they face a number of psychological hurdles that hamper them from saving enough money for the long-term. Although prior theory-derived interventions have been successful in addressing some of these obstacles, encouraging saving behavior at levels that will adequately fund future consumption is a challenging endeavor for policymakers and consumers alike. In a field setting, we test whether framing savings in more or less granular formats (e.g., saving daily versus monthly) can encourage continued saving behavior through increasing the take-up of a recurring deposit program. Among thousands of new users of a financial technology app, we find that framing deposits in daily amounts as opposed to monthly amounts quadruples the number of consumers who enroll. Further, framing deposits in more granular terms reduced the participation gap between lower and higher income consumers: three times as many consumers in the highest rather than lowest income bracket participated in the program when it was framed as a $150 monthly deposit, but this difference in participation was eliminated when deposits were framed as $5 per day.

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