Eliminating Behavioral Barriers to Saving through Savings Goal Setting and SMS Reminders in Paraguay

Combining savings goals (either generic or emergency savings themed) with text reminders increased savings behavior, while either tactic alone did not. However, changes in savings habits faded away after the reminder messages stopped. 

Savings Outcomes: Both the savings goal and text reminders and emergency savings and text reminders interventions increased individuals’ likelihood to save and their amount saved during the period they received reminder messages. On average, combining personalized goal setting with reminders increased the likelihood that individuals set a savings goal, increased the amount of their savings goal by 145 percent, and led them to save for an additional .32 months of the year (a 29 percent increase), all relative to the comparison group. Financially literate individuals saw similar but stronger trends: their savings target was 582 percent greater than similarly financially literate individuals in the comparison group. 

However, goal-setting around a specific purchase, the message and text reminders, and the savings goal only interventions did not increase savings. In fact, the savings goal only intervention decreased savings on average. Individuals in the savings goal only group were less likely to have a savings goal and set 72 percent lower savings targets relative to the comparison group. This was especially pronounced among individuals who had a larger discrepancy between the amount they currently saved and their budget balance; the savings exercise may have discouraged them by highlighting their past difficulty with saving.

Further, the message and text reminder intervention also led to negative outcomes among the most financially literate individuals. These reminders led financially literate people to be less likely to have a savings target, and to lower their savings targets by 69 percent compared to similarly financially literate individuals in the comparison group. Financially literate people likely already understood the value of saving; being reminded of this may have caused them to feel like their right to choose to save was being restricted or to feel like most people don’t save, changing their view on social norms. Personalizing the text reminders with details on their own goal setting in the combined interventions offset this somewhat.

Credit Outcomes: Individuals in the groups with personalized savings goals and text reminders were approved for PYG896,000 more credit (a 36 percent increase) relative to the comparison group. The authors suggest that this increase in credit, despite increases in savings behavior among the same groups on average, may be due to individuals using credit as a commitment device to save. In contrast, the savings-only and message and text reminder interventions reduced individuals use and requests for credit respectively.

Perception of Intervention: Researchers also tested what individuals remember about the interventions they received in order to understand how each intervention was perceived by participants. Including personalized reminders of individual saving goals in the text reminders did not make the message more memorable than generic reminders. However, this personalization did help participants remember receiving a message urging saving. This suggests personalized savings reminders helped increase savings by reminding individuals of their own specific savings goal, and not by making the message on the importance of saving more memorable. 

Overall, researchers suggest that future savings products targeted at low-income individuals may be more effective if they combine both reminders and personalized budget and savings information. Receiving  generic reminders or savings goal-setting alone may negatively impact some individuals' savings behavior. Indicating that expensive interventions previously evaluated cannot be replaced by cheaper alternatives.