Getting to the Top of Mind: How Reminders Increase Saving

This paper develops and tests a model of savings and consumption behavior in which individuals have limited attention. The model predicts that individuals will under-save when they are inattentive to future expenditures and that reminders to save will increase savings. The model also predicts that reminders mentioning a particular future expenditure and those sent to time-inconsistent individuals will be especially effective.

The study tests this prediction through field experiments on reminders to save in Bolivia, Peru, and the Philippines. In each of the three experiments, individuals opened a bank savings account that included varying degrees of incentives designed to encourage individuals to reach a savings goal. Some individuals were randomly assigned to receive a monthly reminder via text message or letter, while a control group received no reminder.

The study revealed that reminders increased the likelihood of reaching a savings goal as well as the total amount saved in the reminding bank. Findings include:

• Reminders that highlighted the client's particular goal were especially effective;
• Reminders were particularly effective for individuals who exhibited preference reversals when facing hypothetical consumption tradeoffs over time.