A Fresh Behavior Inducing Solution: Tiered Match Savings
By Jason Zavala, Guest Contributor on 07/18/2011 @ 01:15 PM
Jason Zavala is president of MitiGate, Inc., a consumer financial education consulting firm. As a former counseling practitioner, he has been observing and teaching about homeownership, foreclosure and general money issues nationally for over a decade.
Inciting and incenting behavior: the IDA saver
Imagine yourself as an IDA practitioner. Now consider what makes an IDA program participant respond, engage or consume differently than other typical students… Do we (in)advertently cajole or coerce their savings behaviors? How are these savers impacted if they give you the “wrong answers” or pursue undesirable directions? Are IDA participants seeking a certain level of social significance and belonging? Do they seek to please?
With these types of motivations in mind, how can we maximize Match Savings Accounts outcomes?
IDA savers may be better teachers of actions than we are. Their behavior – as it relates to their matched savings account – suggests that there are a few easy wins that can be tied to our behavioral messaging. Once we understand more about the target IDA audience (which has changed over time), the answer lies in redefining the match methodology by integrating behavioral triggers.
Formulaically, we know (generally) that IDA savers can represent each and all of the following:
- Very modest income
- Low annual cash resources
- High financial returns on program investments
- Goal use restrictions
- Responsiveness to program training requirements and deposit benchmarks
- Heightened awareness of mandatory engagement
- Elevated expectations of success
Mix in some tenets about actions related to finances: none of us really like details, preparation, nuances, complexity, or evaluation. For example, think about…
- What you did the last time you were on a phone and a customer service person invited you to stay on the line after your call for a quick survey
- How we sense a need to buy before the sale ends (even if the price was marked up)
- How your retirement fund automatically supports, at a baseline, the least risky denominator, and how that affects your involvement
- How difficult it is to make a choice in the toothpaste aisle (not to mention all of the decisions you don’t make!)
These types of behavioral economics triggers – hassles, loss aversion, power of default and proliferation of choice – can be applied to matched savings programs. IDA participant behavior is the trigger point to build upon and help reenergize the matched savings field. In doing so, we may be able to identify more cost efficient, outcome-relevant designs.
So how would a new, tiered match savings interface with behavioral change? Below is an example of some prescribed match thresholds that a participant can achieve and be “rewarded.” Consider giving your customers the options to “access” anywhere from 1:1 to 3:1 matches based not on the goal itself but the continuation of asset security, i.e. the behavioral shift. The effort is both graduated and optional. For example, at a 2:1 match, the next option may invite them to engage a health specific goal. Let the participant identify the success that brings them to 2.5:1 match. It’s like inviting them to be part of the gold, platinum, and diamond level and while they design the rewards themselves at the same time.
Here is a partial list of segments for a tiered design with behavioral trigger cues to develop:
Consider a Tier 1 and Tier 2 engagement. Begin to think about time variants at which a saver attempts a new behavioral exercise and how you can incorporate values that measure and weight applications based on ease of application or impact, and identifying behavioral benchmarks pre and post goal attainment. Do you know how long they sustain the patterns or behaviors? Were behaviors triggered only when the participants were expecting rewards?
Tiered match savings planning: facilitating positive social and financial outcomes
Acquiring or purchasing is often the saver’s first goal, and sometimes the only goal. The win-win for both the saver (consumer) and the program comes in management of the goal and the continuation of positive savings behaviors. For some savers, the goal is a car; for the program managers, it is an economical car and economical use. For a saver it might be a business venture; for the program manager it includes a risk conscious application. These completed efforts model savings beyond tomorrow, in that it is ideally planning in perpetuity.
A tiered matched savings structure not only helps achieve IDA program outcomes but can help encourage participants to sustain their positive actions. So how can you behaviorally link your match plan to a tiered formula for your participants?
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