Do you keep telling yourself that you must start saving money, but your bank balance barely budges?
Well, the trouble may be in what you're telling yourself.
Recent research suggests establishing clear-cut goals, like building funds for a wedding or a down payment, is more effective than simply vowing to save money.
Then, once a goal is in mind, set up a text message at regular intervals to remind yourself to make savings deposits.
That's the advice of Dartmouth economist Jonathan Zinman and Yale economist Dean Karlan. They recently completed experiments with three foreign banks -- in Bolivia, Peru and the Philippines -- whereby customers were asked to open accounts to build savings for a specific, stated goal. Then, some of the customers were randomly selected to receive text messages at regular intervals reminding them to make a deposit.
Those who received the messages saved 6 percent more than the control group who didn't get the reminders, plus they were 3 percent more likely to reach their savings goal, says Zinman.
Moreover, among the customers getting text reminders, those who tended to save the most had messages that mentioned their specific goal, like "Time to make your Christmas fund deposit," Zinman says.
Getting your attentionAlthough the experiment was conducted with foreign banks, the premise of the research grew from previous studies in the United States, where it's been shown that we simply can't pay consistent attention to future goals when we're bombarded with daily distractions, says Zinman.
In fact, the results of the text reminder experiment may have been even more pronounced if it involved U.S. subjects, Zinman says. That's because people in the U.S. are exposed to many advertising messages, daily information distractions and ample opportunities to spend on current purchases rather than attend to future needs.
It's part of human nature, to "think more intensely about the present than the future," says Karlan. "As a result, things that we can do to increase attention to future needs, to get them in the front of mind are effective."
Boosting resolveWhile we may think our inability to save is due to lack of will power, it's actually a more nuanced problem of being able to focus today on our goal for tomorrow, Zinman says.
That's why getting a message reminding yourself of a goal draws the future into the present, he explains. In future research, he hopes to study the relative importance of labeling a specific savings goal and reminder messages in prompting us to attend to our intention to fulfill future needs by saving.
Adopting the planTech-savvy consumers can mimic this approach because all that's required is setting up reminder messages and establishing specific goals.
Many online banking customers may find their institution has a feature that allows them to label various accounts. At Chase, for example, customers can peg a nickname on any online account, according to spokesman Thomas Kelly. And Fifth Third Bank has a "Goal Setter Savings" that allows customers to define a goal and calculate how much they need to save for it, according to spokeswoman Stephanie Honan.
"It makes intuitive sense that a goal helps you save, since just trying to save for the future is so nebulous," says Erin Constantine, product management manager for Wells Fargo.
In 2006, Wells Fargo introduced "My Savings Plan," whereby online customers can monitor specific savings goals with a progress meter. Constantine says it tends to be younger customers who are trying to save small amounts who are the most active users of the goal-based savings plan.
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