June Puett Lindsay Ferguson Barb O’Neill

Goals: Integrate America Saves Week into Extension Programs Savings Behavior Update

Savings: Make It Automatic!

Savings Behavior Research

Financial Fragility Data May 2016 Federal Reserve Board study: • 46% of adults said they either could not cover an

emergency expense costing $400 or would cover it by selling something or borrowing something

• 31% of non-retired respondents had no retirement

savings or pension http://www.federalreserve.gov/2015-report-economic-well-being-us-households-201605.pdf

2016 EBRI Retirement Confidence Survey (RCS)

• 69% of workers (or their spouse) had saved for retirement

• Considerable gap between workers’ expectations and retirees’ experience about leaving workforce

• 48% of workers (or spouse) calculated retirement savings need

• 54% of workers had < $25,000 saved (excluding value of home and DB pension

– Includes 26% who have < $1,000

https://www.ebri.org/pdf/surveys/rcs/2016/EBRI_IB_422.Mar16.RCS.pdf

2016 America Saves Survey • 2016 survey: 49% of 1,004 respondents save at least 5%

of income

• 43% save automatically outside of work

• 40% report good or excellent progress in “meeting their savings needs”

• Those with “a savings plan with specific goals” save more successfully than those without a plan

http://www.americasavesweek.org/less-than-half-of-u-s-households-report-good-savings-progress-according-to-9th-annual-america-saves-week-survey/

National campaign Uses principles of social marketing and behavioral economics to

motive and support low to moderate income households to save money, reduce debt, and build wealth.

Consumer Federation of America founded in 1968. 270+ nonprofit pro-consumer groups

• Annual opportunity to promote positive savings behavior. • Chance for individuals to assess their own saving status. • Use creative delivery methods (media, classes, events, etc.)

Audiences: • Internal- Coworkers, students, staff members • External- Extension clients, community at large, partners

America Saves Week 2016 Results

• Reached nearly 34 million individuals • 384,600 people reached through community events, financial

counseling and workshops, and tax sites • 40,164 individuals pledged or repledged to save • More than 2,000 organizations signed up to participate • 34 America Saves Designation of Savings Excellence Recipients

– 15 banks & 19 credit unions • 16 states or cities proclaimed a week as America Saves Week

Learn More

AmericaSaves.org AmericaSavesWeek.org

America Saves Week 2017

1. Sign Up at AmericaSavesWeek.org 2. Plan Activities 3. Download Materials 4. Participate at any level- large or small

BENEFITS: • Recognition as participating organization • Emails and reminders from America Saves • All materials co-brandable

Resources for Organizations

• Posters and fliers • Content for

websites, newsletters, and social media

• Press releases • PowerPoint

presentations

Themes:

• Monday: Save Automatically/ Save For Emergencies/ volatile income

• Tuesday: Family Savings Day

• Wednesday: Save For Retirement – Choose to Save / myRA

• Thursday: Saving at Tax Time/ SYR

• Friday: Debt and savings

Embeddable pledge form

I pledge to save money, reduce debt,

and build wealth over time.

I will encourage my family and friends

to do the same.

Benefits of the Pledge

• 1st step in commitment to saving • Simple savings plan • Goal-based emails • Savings challenges & eWealth Coach • Text messages • Communication opportunities with Savers throughout

the year

Local Campaign Pledge on Website & AmericaSaves.org

Motivational Resources

America Saves - Monthly Email with Tips and Advice

Quarterly E-News with Information and Stories

Military Saves - Monthly Email with Tips and Advice

Motivational Resources

Goal-based texting tips & reminders encourages continued saving.

Text Examples: America Saves: With each savings deposit, you are one step closer to getting out of debt. Have you made your deposit this month? Reply YES or NO. America Saves: Need to pay off debt from last holiday? Pay off debt with double-digit interest rates. http://bit.ly/14j3CkX America Saves: Once a month, use records to review what you've purchased. Reallocate some of this spending to emergency savings.

• Mini-grants • Reporting survey –use as a planning tool • 2017 Digital Kit • I’m Saving For… contest • eXtension Financial Challenge • Webinars • Video contest

National Extension America Saves Week Programs

Savings Promotion Resource Kit archived at https://njaes.rutgers.edu/money/savings-promotion-resource-kit/

Archived eXtension Webinars Savings Strategies for Military Families (2/16): https://learn.extension.org/events/2344 Investing With Small Dollar Amounts (3/15): https://learn.extension.org/events/1717 Calculating What to save for Retirement (2/15): https://learn.extension.org/events/1716 Savings Strategies for Non-Savers (2/14): https://learn.extension.org/events/1426 Saving Money: Research Insights (2/14): https://learn.extension.org/events/1442

Savings Challenges http://articles.extension.org/pages/73884/monthly-investment-message:-july-2016

Tax Time Savings • Volunteer Income Tax Assistance • SaveYourRefund.org contest • Tennessee Saves You Tube video: https://www.youtube.com/watch?v=5etDEnKColo

How can we alter savings behavior?

Characteristics of Successful Savers

• Grinstead et al. (2011) study of IDA program participants in American Dream Demonstration

• About 4 of 5 low-income working families are “asset poor” with < 3 months expenses at the federal poverty level to survive a financial crisis

• Hours of participation in financial education program, higher matched cap, prior use of a savings account, and greater educational attainment were associated with greater likelihood of savings and saving goal achievement

http://www.afcpe.org/assets/pdf/vol_22_issue_2_grinstead_mauldin_sabia.pdf

Implications •Learning needs vary. Financial education should be tailored and individualized (e.g., financial coaching)

•Peer financial counseling is a low-cost option to savings coaches

•High match rates and match caps motivate people to save

•Provide a link between people’s saving goals and financial education content

Characteristics of Successful Savers

• Rha et al.(2006) study of the effect of “self-control mechanisms on saving behavior: SCF data

– (e.g., saving goals, anticipation of future expenses, saving rules including saving regularly or saving one family member’s income)

• Household saving behavior was strongly affected by mechanisms that help people practice self-control; 56% spent < income

• Households with savings rules were much more likely to spend < income than those without rules

http://www.afcpe.org/assets/pdf/vol-1722-self-control-mechanisms.pdf

Implications •Behavioral variables affect savings behavior at all income levels

•Help people establish realistic personal “savings rules”

•Help people anticipate future financial planning needs

•Teach financial goal-setting and provide tools with which to do it

Savings Barrier: Exponential Growth Bias

• “Tendency to linearize exponential functions when assessing them intuitively”

–People severely underestimate how much interest they earn on savings or pay on credit cards

• Biased people borrow more, save

less, and favor shorter maturities

• Stango, V. and Zinman, J. (2009), Exponential Growth Bias and Household Finance. The Journal of Finance, 64: 2807–2849.

Implications •Teach The Rule of 72 so people understand “doubling periods”

•Use hands-on activities to illustrate the effects of compound interest on debt and savings

– http://rci.rutgers.edu/~boneill/assignments/sliderule1.html

– http://rci.rutgers.edu/~boneill/assignments/sliderule2.html

Savings Resource: Visualizing the Future

• People need to visualize the future impact of their savings

• Many people are not good with long-term decisions

• Hal Hershfield (NYU) et al.: people save more money after being shown digitally altered pictures of themselves at older age

• http://www.marketingpower.com/aboutama/documents/jmr_forthcoming/increasing_saving_behavior.pdf

Implications •Show people what they could look like:

– http://faceretirement.merrilledge.com/

– http://in20years.com/

•Show people how much money they can lose by not saving: http://rci.rutgers.edu/~boneill/assignments/sliderule2.html

Savings Resource: Prize Linked Savings (PLS)

• People are more likely to save when offered the chance to win cash or prizes

• PLS products more effective at inducing savings than standard interest-bearing accounts offering the same expected return

• Controlled experiment by Filiz-Ozbay (U of Maryland) et al.:

http://www.nber.org/papers/w19130

http://econweb.umd.edu/~ozbay/savings.pdf

Implications • Combine features of savings and a lottery, especially for low-income people who view lotteries as a form of financial planning (not necessarily irrational) • Resources: http://www.savetowin.org/ http://saveyourrefund.launchrock.com/ http://www.d2dfund.org/ http://blogs.wsj.com/economics/2013/06/21/promise-of-prizes-helps-people-save/

Savings Resource: Text Messages

• Karlan et al. (Yale): conducted experiments with text messages

• Even low-income bank customers managed to save part of their income when nudged by regular text messages

• “Reminders will be more effective when they increase the salience of a specific expenditure”

• http://karlan.yale.edu/p/Top-of-Mind-April2010.pdf

Implications • Regular “nudges” can motivate people to save

• Text messages are an effective motivational tool

• Reinforce the connection between saving and specific financial goals

• Brain studies: imaging a future goal is almost as powerful a “zing” as achieving it (e.g., buying a car)

Be Creative! Have Fun!

Contact us:

Barbara O’Neil, Rutgers University

oneill@aesop.rutgers.edu

Lindsay Ferguson, America Saves lferguson@consumerfed.org

June Puett, University of Tennessee Extension

jpuett@utk.edu