Creating pathways to sustainable homeownership with behavioral insights.

How behavioral insights can enhance credit-building tools

Individuals regularly struggle to save for retirement. Using a large-scale field experiment (𝑁 =97,149) in Mexico, we test the effectiveness of several behavioral interventions relative to existing policy and each other geared toward improving voluntary retirement savings contributions. We find that an intervention framing savings as a way to secure one’s family future significantly improves contribution rates. We leverage recursive partitioning techniques and identify that the overall positive treatment effect masks subpopulations where the treatment is even more effective and other groups where the treatment has a significant negative effect, decreasing contribution rates. Accounting for this variation is significant for theoretical and policy development as well as firm profitability. Our work also provides a methodological framework for how to better design, scale, and deploy behavioral interventions to maximize their effectiveness.

One psychological barrier to putting money aside for retirement may be an inability to fully empathize with the economic woes of one’s future self. In tests of ways to lower this barrier, previous studies have had experimental participants interact with visualizations of their future selves. Despite the promise shown by such interventions in small-scale tests in the lab, little is known about their effectiveness in the real world. Our research evaluates the effectiveness of an aging filter (that is, software that creates an image of how a participant might look when older) in a randomized field study involving nearly 50,000 people saving for retirement in Mexico. The intervention, carried out over a month, modestly increased the number of account holders who made one-time contributions (from 1.5% in the control group to 1.7% in the treatment group, representing a 16%increase), as well as the value of those contributions. Although the total amount of money put aside was modest and the number of sign-ups fora recurring contribution savings program did not change significantly, this intervention proved cost-effective: It increased savings at a rate almost 500 times the cost of the intervention. Such psychologically informed interventions can effectively complement other initiatives to encourage people to save for retirement.