The Financial Health Check

Posted in Projects

Helping People Build A Stronger Future

Most Americans say they wouldn’t have the money to cover an unexpected $1000 expense—yet most of us face an unplanned cost of at least that much each year.

Even modest savings cushions could help households manage unexpected expenses or disruptions in income without relying on costly credit. But in practice, setting aside money is difficult. That’s why people across all income levels lack savings. The consequences of lacking a financial buffer most affect people with low incomes, who often don’t have as much access to credit and traditional banking services. In the event of unplanned costs like a medical emergency, car accident, or loss of employment, they’re often forced to cut back on essentials or take out high-interest loans that can trap them in debt cycles.

For years, the standard way of tackling this problem has been with financial education programs. But while these well-intentioned programs do appear to increase knowledge, they haven’t been shown to change behavior—or improve financial outcomes. We know from behavioral science that providing more information doesn’t always translate to taking action. To uncover behavioral strategies for fueling savings, ideas42 partnered with BECU, one of the nation’s largest credit unions, to design and test an alternative to traditional classroom-style training.

In a rigorous evaluation of the Financial Health Check, we found that participants’ net savings transactions were 34% higher than members who did not have access to the program. These results, tracked during the 12-month period following contact, demonstrate the promise of services like the Financial Health Check—a one-time, 30-60 minute phone call—to help families achieve financial resilience. The three key behavioral elements in the program are creating a moment that fits into people’s lives, facilitating follow through in real time, and automating savings.

This program builds on a previous pilot that used similar behavioral strategies, but during in-person consultations. In that case, we found that recipients with no savings at the credit union had 21% more savings at the end of the study period than peers who didn’t access it. It was because of this pilot’s strong results that we continued to enhance its behavioral features and offered the appointment over the phone to reduce the time and coordination it takes to participate.

Generously supported by the MetLife Foundation, these results and our iterations demonstrate the potential of using behavioral science to make financial coaching more effective at actually changing behavior—not just increasing knowledge.  Check out the full report of the the Financial Health Check’s impact.

Interested in offering the Financial Health Check to clients at your financial institution? Reach out to us: info@ideas42.org