How a simple change in framing helps people save better

How a simple change in framing inspired a significant change in savings behaviour.

How a simple change in framing helps people save better
Photo by Ibrahim Rifath / Unsplash

One of the major challenges a country like South Africa has is that people do not save enough for their retirement.

This reality puts tremendous strain not just on the poor people that need to endure their old age with limited amounts of money, but also severely taxes society's financial safety nets.

There are no doubt a number of reason for this - one of which is that people tend to have a natural mental bias towards worrying about the present rather than a mindset that is weighted towards preparing for the future.

Another reason is that the language of finance is vague for a lot of people.

Researchers have concluded that particularly with lower-income communities - the traditional mathematical language of finance and savings is far to intangible to inspire the active motivation to save money for the future.

'A new study finds that a simple change in information architecture, such as how the savings rate is framed, can lead to a significant boost in savings behaviour among lower-income employees.'
'The study looked at what would happen if, instead of featuring a worker’s savings rate as a percentage, it was described in terms of pennies-per-dollar earned. For example, a 7% savings rate would be expressed as saving “7 pennies” for every dollar earned.'
'The study found that workers in the percentage condition had an average savings rate of 6.9%, whereas those in the pennies condition had an average savings rate of 8%.'

So to put that result in context; just a simple reframing of the savings language boosted the saving rate of lower-income earners to compare favourably with some of the wealthiest members of society.

By simply reframing the language to pennies-per-dollar earned instead of always referring to percentages people were able to contextualise and mentally visualise how their money would be used better, which inspired a significant change in their behaviour.

Such a fantastic innovation and one that should be adopted and used by all banks and pension schemes surely.


How Simple Reframing Can Boost Retirement Savings
“Pennies” over “percent”? A new study finds that a simple change in information architecture, such as how the savings rate is framed, can lead to a significant boost in savings behavior among lower-income employees.