It’s no secret that saving money is a good idea. Even when money is tight, putting away a small amount on a regular basis can help deal with unforeseen financial shocks as well as allow people to make investments to build financial stability in the long-term. But time and time again we see people failing to save for the future, despite their best intentions.

A new ideas42 white paper shows the important role that behavioral economics can play in increasing savings rates among the poor.

The paper outlines the results of a project we’ve just completed in collaboration with Grameen Foundation and CARD Bank, Inc. in the Philippines – a country where only 26 percent of adults use formal financial services and almost 80 percent do not have a deposit savings account. We found that by applying behavioral design principles, and introducing a relatively inexpensive set of behavioral levers at important stages of opening and interacting with a savings account, we could have a significant impact on savings rates.

In fact, the results were dramatic. A randomized controlled trial showed that clients who were exposed to the new design when opening a savings account made initial deposits that were 15 percent higher than the ones made by clients who opened accounts using the standard process. They were also 73 percent more likely to initiate a transaction in the new account, and made smaller and more frequent ongoing deposits as well as smaller withdrawals. Most importantly, the intervention appears to have had the effect of increasing balances by 37 percent compared to the control group over the course of the eight-week pilot.

The pilot project with CARD Bank not only produced successful results with regards to savings behaviors, but also generated several useful lessons about microsaving and behavioral design that can be used in future product and program innovation. Savings is just one of many areas where an ‘intention-action gap’ – where people already want to do something that would be good for them, but have trouble following through in this intention – exists. These insights have real potential to significantly contribute to approaches that address poverty across the world.

You can read more about the project in the white paper here.