NEW YORK – Making a New Year’s resolution to put away more money in 2019 for a trip or retirement? According to Stephan Meier, James P. Gorman Professor of Business and a Chazen Senior Scholar at Columbia Business School, talking to a friend or associate about savings each week can double the amount that you actually save.
In the paper, “Saving More in Groups: Field Experimental Evidence from Chile,” Meier and co-authors Felipe Kast and Dina Pomeranz test the effectiveness of peer feedback in helping people achieve their savings goals.
The researchers ran two experiments in which they investigated whether and how peers influence each other’s personal decision-making around savings. The first experiment offered participants a basic savings account and divided them into a total of 196 peer groups that met weekly. At these weekly meetings, participants were encouraged to set public savings goals, progress on which would be monitored by the group. A control group was offered a savings account with a much higher interest rate, but no group meeting or system of accountability. Participants meeting regularly in-person deposited 3.7 times as often into their savings accounts and their average savings balance was almost twice that of the control group.
The second experiment was conducted one year after the opening of the savings accounts. Participants who opened an account in the first experiment, owned a cell phone, and indicated interest in a text message service to help them save more were assigned to one of three groups. The first group assigned participants to a “savings buddy” and received regular updates on each other’s progress over text. The second group received automated savings reminders and information about how others were doing in their group. The third group did not receive any text messages. As a result, the researchers found that holding people accountable through regular feedback and follow-up text messages also significantly increased savings, almost as much as actual in-person, peer group meetings.
Beyond the issue of savings, the research demonstrates that feedback and follow-up through text messages or at in-person group meetings can potentially help individuals achieve other resolutions effecting their health and well-being (e.g. weight loss, drug addiction, eating disorders, etc.).
For more information, please read the related Chazen Institute research brief (PDF).
About Columbia Business School
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About the Jerome A. Chazen Institute for Global Business
The Jerome A. Chazen Institute for Global Business is the interdisciplinary hub of global business knowledge at Columbia Business School. By injecting a global viewpoint into coursework, supporting research on global business, and sponsoring provocative forums where business leaders and policy-makers engage in vigorous debate, we pool the vast wealth of knowledge that exists within Columbia Business School, distill it for people who operate in the world’s marketplace, and provide a global network for lifelong learning.
About Stephan Meier
Stephan Meier is the James P. Gorman Professor of Business and a Chazen Senior Scholar at Columbia Business School.
In his research, he investigates the impact of psychology and economics on human decision-making and its implications for public policy and firms' strategy. His work has been published in the leading academic journals including The American Economic Review and Management Science, and has been profiled by top-tier media outlets including The Economist, The Wall Street Journal, Financial Times, and The New York Times.
Meier holds a PhD in Economics from the University of Zurich. He was previously a senior economist at the Center for Behavioral Economics and Decision-Making at the Federal Reserve Bank of Boston and taught courses on strategic interactions and economic policy at Harvard University and the University of Zurich.