Researchers in the Netherlands wanted to find out whether people with a low savings amount would start saving more if they knew they saved less than others in their neighborhood.
Providing such info is referred to as a social norm nudge. Such nudges signal appropriate behavior and are classed as behavioral expectations or rules within a group of people.
My first thought when I started reading the study was my monthly utility bill, which provides a comparison of my utility usage compared to the average utility usage in our neighborhood and the lowest utility usage in the neighborhood. I think in the two-plus years, we have never been below the average. I’m not questioning the data, but it was interesting when several neighbors got together and someone mentioned their utility bill, and it turned out that no one in the group was below the average. I guess that means I need to find more environmentally-friendly neighbors and become one myself.
Anyway, back to the savings study.
The researchers worked with a Dutch Bank (ING Netherlands) to compare the savings amounts of over 15,000 clients. The social norm nudge was targeted to households whose savings amount was less than that of the median household in their neighborhood. Through email communications, sent by ING Netherlands, the clients received an email stating “You have a lower savings amount with us than most other ING clients in your neighborhood.” The intent of the email was to encourage clients to change their savings behavior and save more.
The results of the study found that those who received the email with the social norm nudge were more likely to click on (or click more often on) a link to their personal page where they could start or adjust an automatic savings plan.
However, while the nudge drove a strong intent to save, the study also found this social norm nudge to have neither a short-term or long-term effect on actual savings. Likewise, the researchers didn’t find any significant difference between the clients that received the nudge and those that didn’t on their frequency of automatic savings transactions.
The results of this study were somewhat surprising, as there has been a large body of existing evidence that found social norm nudging to change people’s behavior. The researchers concluded that while the social norm nudge experiment did strengthen people’s intentions to save, these intentions are not always followed up by a substantive change in behavior.
I must admit I feel the same kind of way about our monthly utility bill. Every month when I open up the envelope, the first thing I look at is how we did compared to our neighbors. As I said, we are always above the average. So I immediately promise to myself to be more diligent.
But then an hour later, I’m turning up the thermostat because it dipped below 72 degrees in the house.
So perhaps I need more of a nudge than just a chart; perhaps some tangible reward from the utility company for any household that is below the average for six straight months.
But I also think when it came to a savings nudge, I think I would try more aggressively not to be below the average. In other words, these emails from the bank would likely cause me to modify my behavior.
Perhaps because that has a very tangible reward, you can see your savings account grow.
With the utility bill, you may not notice any immediate tangible benefit if you were using fewer utilities than your neighbors. It may take a while to realize any cost savings from such behavior. That is why attaching a tangible reward to the desired behavior may encourage the desired change.
Maybe the banks and utility companies should get together- any savings from lowered utility usage would go directly into your saving account.