Wish you could save more money? A new study led by Katy Milkman, a Wharton professor of operations, information and decisions and the co-director of Penn’s Behavior Change for Good Initiative (BCFG), found that simple reminder emails gave people a small push to transfer money into savings.
That remains one the hardest financial habits for many people to stick to. About one in four adults in the U.S. has no savings at all, and four in 10 have less than a month’s earnings stashed away. That leaves millions of Americans exposed to unplanned costs like medical bills that can force them to sell possessions or take on debt to fund.
To find out whether behaviorally informed email reminders could help spur savings, Milkman — along with over a dozen co-authors, including her Wharton faculty colleagues Angela Duckworth and Christophe Van den Bulte as well as staffers Sean F. Ellis, Dena Gromet, and Ella DeMay of BCFG — ran one of the largest-ever studies on how to encourage people to add to their savings accounts.
“One of the biggest barriers to behavior change is simply that these tasks are not top of mind. We forget to move money from checking to savings, or we put it off until tomorrow,” Milkman said. “But when these are important decisions, forgetting can have real consequences.”
Evaluating a Way to Encourage Saving
To find out if well-designed email reminders could help people follow through, the researchers tested them with nearly 2 million bank customers in a “megastudy.” Customers were randomly split into groups; some got one of seven types of email campaigns for two months encouraging them to save, and others received no emails at all.
Each campaign tested a different way to encourage saving. Some emails arrived at the start of the month, or after a large deposit of $300 or more. Others came near the end of the month, prompting customers to set aside what was left in their account. Another series of messages congratulated them for making recent deposits, reinforcing the behavior.
Overall, people who received any of the reminders were slightly more likely to make a monthly one-time savings deposit — about 0.05 percentage points more likely, or roughly a half-percent increase, compared with those who got no messages.
But not every message worked well. The approach that performed best was sending weekly emails that differed depending on a person’s savings pattern. Specifically, those who did not make a deposit in a given week were nudged to initiate a transfer to their savings account, but those who did put cash away were congratulated on their progress.
These weekly, tailored emails made customers about 1.3% more likely to make a one-time deposit to savings in a given month of the study, compared to those who got no emails at all. It was the strongest result of any email type the researchers tested, and it was also one of the email campaigns that employed the most frequent reminders.
“Moms have known it for generations: Nagging works,” said Milkman.
“One of the biggest barriers to behavior change is simply that these tasks are not top of mind.”— Katy Milkman
Removing Friction for Bigger Impact
While the gains for each individual were modest, they could potentially add up to something substantial across millions of customers.
The researchers estimated that if the best-performing two-month email campaign had been sent to every person in the study, they could have saved an extra $6-10 million — and sending such email nudges would have cost the bank almost nothing.
But the results also showed clear limits to what these emails could achieve.
While they boosted monthly one-time transfers to savings, they did not lead customers to set up more recurring transfers — the kind that move money into savings automatically each month. The researchers said this was likely because the bank’s mobile app did not support those transfers, so people could not easily follow through when directed to the app.
That finding underlines the importance of a smooth user experience, Milkman said. “Friction is critical to remove if you want people to follow through. It’s likely that we would have seen a greater impact if customers had been able to set up recurring transfers directly in the app,” she added.
“Moms have known it for generations: Nagging works.”— Katy Milkman
Implications for Banks and Policymakers
These findings have implications for savers, policymakers, and banks to boot. “We already use policy to encourage saving, like offering tax advantages to firms that default workers into retirement plans. You could imagine similar incentives for banks that use other proven strategies to help customers build their savings,” said Milkman.
The authors note that future research could test whether longer campaigns, or combining reminders with automatic transfers to savings accounts, could produce long-lasting gains.
“Email was the easiest communication channel to test, but also the easiest to ignore,” said Milkman. “The next step is keeping the reminders going and using channels that do a better job of getting people’s attention.”
