Save More Tomorrow™: Using Behavioral Economics to Increase Employee Saving
Richard H. Thaler, Shlomo Benartzi
Journal of Political Economy · 2004
Abstract
Addresses the problem of inadequate retirement savings due to present bias, loss aversion, and inertia. The authors design a prescriptive financial program that bypasses these psychological barriers by asking employees to commit to saving a portion of their *future* pay raises.
Methodology
An empirical field experiment implemented across multiple corporate firms, tracking employees who rejected standard saving advice but accepted the 'Save More Tomorrow' program over several pay-increase cycles.
Findings
The average saving rate for program participants increased dramatically from 3.5% to 13.6% over a 40-month period, demonstrating that committing to future actions successfully mitigates present bias.
Applied nudge
Encourage users to pre-commit to beneficial habits or upgrades that will take effect at a future date, such as during their next billing cycle.
Citation
Thaler, R. H., & Benartzi, S. (2004). Save More Tomorrow™: Using behavioral economics to increase employee saving. Journal of Political Economy, 112(S1), S164-S187.