Automatically enroll employees into a savings scheme

Default employees into a savings scheme whereby a portion of their wage is automatically saved at the end of the month. Additional matching incentives can also be offered to stimulate additional savings. The automatic feature can eliminate hassle as savings become automated and incentives motivate additional savings. This can be applied to any employee with a domiciled salary (i.e. salary paid directly into current account).

Behavioral Tools: Default, Incentive

Benchmarked Intervention

Experiment Overview

Employees at a large firm were automatically enrolled in a mobile-phone banking-based savings account with an automatic deposit feature. Employees assigned to the treatment group were enrolled in a savings scheme where 5% of their salary was automatically deposited into their mobile savings account. The control group was not subject to the automatic contribution scheme. Additionally, one-third of the workers were randomly assigned to receive matched incentives of 0%, 25%, or 50% as an additional exploration.

Impact

Employees in the control group given a 50% matching incentive increased their likelihood of contributing to savings by about 40 percentage points, roughly equivalent to the effect on the treatment group with no matched incentive. More importantly, individuals actively continued to save after the experiment ended and were also more confident about their ability to meet financial obligations – 18 months after the intervention, those assigned to a 5% default savings had higher savings balances.

Source: Blumenstock, Callen and Ghani, “Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan”, American Economic Review, 2018, 108 (10), 2868-2901.