Founder of The Behavioural Architects, Crawford Hollingworth, discusses 21st Century piggy banks. We all find saving quite hard in this fast moving ‘cake today’ culture. The excitement of shaking and feeling the weight of an old-fashioned piggy bank may not be quite as fun as it used to be.
Behavioural economics helps us understand why we might find it hard to save and suggests ways of helping us over these barriers. Firstly, it recognises that we have varying degrees of self-control and impulsiveness depending on our personality and the circumstances we find ourselves in. Although some of us are on the extreme with either impressively high self-control or abysmally low levels, two-thirds of us live in a 50/50 world where sometimes we give in to temptation and other times we are well-behaved and resist. But what if it was a good thing to be impulsive?
Buying is what we typically think of as being impulsive, and saving, as Sendhil Mullainathan, Professor of Economics at Harvard, points out, is often just “what didn’t happen”- the leftovers of our decisions not to buy and consume.
So, if you can’t beat them join them, and various banking products globally have been doing just this and making good use of impulsiveness by launching ‘impulse savers’. It’s an example of using technology to take advantage of impulse moments when people are in the right, ‘hot’ frame of mind, thereby helping to overcome the ‘power of now’ bias and encouraging people to save.
In 2008, PNC bank in the US set up a ‘Virtual Wallet’ which featured an incredible array of great initiatives for customers, including ‘Punch the Pig’, a video-game-inspired savings initiative. Each time the pig appears on screen, users can elect to “punch” it to automatically move money from their cheque accounts to their savings accounts, thereby letting the user save at the click of a button. You can determine what your pig looks like and choose whether it’s always present or occasionally “surprises” you by appearing randomly. One reviewer found that the ‘surprise’ mode made him far more inclined to “Punch the Pig” demonstrating how the chase for a dopamine hit – the feel-good hormone – when we spot and punch the pig can actually tempt us to save.
Another user commented “I hated seeing a zero balance in my Growth account – I wanted to Punch the Pig and save some money!” showing us that savings reminders – especially when they are painful to the eye – can work.
Similarly the ‘Impulse Saver’ from Westpac NZ is the world’s first iPhone app that allows you to save literally at the touch of a button.
Other banking initiatives focus on auto-saving differentials. Putnam Investments in the US has recently launched an ‘impulse saver’ app for its 401K plans. The app enables its customers to use their iPhone camera to scan the bar code of products to comparison-shop across other retailers in order to locate a lower price, see the potential cost savings in terms of future monthly income in retirement, and immediately transfer the price differential to their 401K account. As well as incentivising people to save money and look for the cheapest deal, the scheme also has a faint whiff of gamification about it as I can see that people might be incentivised to find the largest price differential, thereby ‘winning’ a game. Reframing a price saving as an actual saving – using the emotional energy [what in BE we call a hot zone].
To get us into a saving culture I guess we need to use all the BE tricks in the book to stop us discounting the future.
So let’s think how we can use people’s impulsiveness in a productive way and help them to discount their futures a little less. I wonder how we could apply this to health and eating habits?
Crawford Hollingworth is Founder of the Behavioural Architects (UK), a global insight, research and consultancy business based on new thinking, new frameworks and new methodologies.