Boosting Financial Health with a Simple Phone Call

Aug 13, 2015 in Blog

In the U.S., 44% of households are considered “liquid asset poor”, lacking savings to cover basic expenses for three months. What would it take to increase the financial resilience of these families? Could you do it with a simple 30-minute phone call? At ideas42, we think so. With funding from MetLife Foundation under its financial inclusion strategy, we’ve been working with one of the nation’s largest credit unions to pilot a new approach to financial coaching. The Financial Health Check (FHC) is designed to help low- and middle- income people improve their financial health by saving more and reducing debt.

During this 30-minute phone-based intervention, specially-trained call center representatives work with credit union members to articulate financial goals, review budgets, and complete action steps the two identify together. How is it possible to do all this in just 30 minutes? After multiple rounds of prototyping and testing, we’ve arrived at a behaviorally-designed solution consisting of advance preparation, an action-oriented call, and minimal follow-up. Since the ‘live’ portion of the FHC is relatively short, we think consumers will find it easier to participate. At the same time, service providers will be much more likely to roll out a solution to consumers on a large scale if it’s light-touch and easy to implement.

In one of the more recent rounds of user testing, 9 out of 10 members prepared for their calls in advance by filling out budget worksheets. During the call, they shared extremely candid details about their financial habits and personal circumstances. And 60% then took the critical step of setting up automatic savings transfers or extra debt payments – actions that are likely to boost long-term financial stability.

What’s driving this high level of engagement and follow-through? In part, early adopters and volunteers are typically an enthusiastic bunch. But the FHC has been designed to take into account common behavioral tendencies that affect us all.

First, the FHC builds on principles of trust and reciprocity. Credit unions often foster a strong sense of community and mission-mindedness. Consumers banking at credit unions think of themselves not as customers or clients, but as “members.” Using this vocabulary and tone throughout our pilot helps to reinforce ideas of partnership and shared interests. Reminding participants of their identities as members may also stimulate positive financial attitudes (“As a member of this credit union, I’m a financially responsible person”). For its part, the credit union must meet and even exceed member expectations for service and quality to maintain trusting relationships.

To turn this goodwill into action, our FHC program sets a personal tone in all communications with members, using phrases such as, “Jane, I’m setting aside time for our conversation” rather than, “Your appointment has been confirmed”. Members know that a real human is waiting on the other side of their computers and phones. This personal touch is balanced with the provider’s need to offer consistent, scalable service by referencing a unified group whose members can be substituted if needed, for example by saying, “My team members and I…” Members in turn are usually happy to return the favor of personalized attention by preparing for and attending their sessions on time.

Second, the FHC creates moments of action. Most people know they ought to be paying closer attention to expenses or saving more, and many even want to follow through on these important steps. But as behavioral science tells us, humans tend to procrastinate and sometimes put off important financial decisions until near-crisis situations force us into action. In personalized emails, the FHC nudged credit union members to act – specifically, to prepare budget worksheets ahead of their sessions – in three ways:

  • We set clear deadlines, such as “by our appointment on Monday at 2:00 pm”
  • We outlined a concrete next-step to take, with help available during the upcoming session. For example, rather than making a vague request to “create a budget” or “think about monthly spending”, we provided a template and asked members to “complete as much of this 15-minute budget worksheet as possible”
  • We promoted accountability, with a live person waiting to provide support rather than discipline. We framed this in a positive light by saying, “I look forward to discussing this with you and helping you achieve your financial goals”

Finally, the FHC makes it easy for consumers to stay on track. When it comes to improving financial health, one effective tactic is automating transactions. Most people simply don’t have the mental bandwidth to constantly monitor their cash flows or remember to transfer money to their savings each month. Many of us have forgotten to pay a bill before leaving for vacation, or ended up with a surprisingly low account balance at the end of the month due to inattention. By automating transactions like savings transfers or regular debt payments, credit union members can prioritize their financial goals with minimal effort. Once they’ve set up these types of systems to help them achieve their goals, they’re more likely to succeed in the long-term.

During FHC sessions, members have the opportunity to identify and automate transactions that fit their individual circumstances. Using the budget worksheets they’ve prepared in advance, members work with representatives to set up transfers on the call, while there is one-on-one, real-time assistance and accountability. Not only is this a more efficient use of call center resources, ensuring follow-through on tactics like automaton can boost long-term financial outcomes for members.

With user testing now complete, the full Financial Health Check pilot will launch in August. More insights and preliminary findings on program effectiveness are coming this fall. In the meantime, learn more about common behavioral science principles here.