With past behavioral economics research demonstrating that nudges can be a potent tool for increasing savings rates, the results of a recent study suggest that fresh start framing can be an effective nudge.
In “Using Fresh Starts to Nudge Increased Retirement Savings,” John Beshears of Harvard University and NBER; Katherine Milkman of the University of Pennsylvania; and Hengchen Dai and Shlomo Benartzi of the UCLA Anderson School of Management conducted a field experiment among more than 6,000 university employees to study the effect of framing future moments in time as new beginnings, or fresh starts.
The idea behind the research is that framing the future time point in relation to a fresh start date—such as a participant’s birthday or the first day of spring—would increase the likelihood that the participant would choose to increase his or her contributions at that future time point, without decreasing the likelihood of increasing contributions immediately.
As part of an experiment, participants received mailings offering an opportunity to choose between increasing their plan contributions immediately or at a specified future point in time.
Interestingly, even though the relatively greater attractiveness of the future opportunity caused by fresh start framing might be expected to decrease take-up of the immediate savings opportunity, the results suggest that such a decrease did not occur. In fact, fresh start framing increased retirement plan contributions following the mailing.
“We found that compared to mailings that described the future savings opportunity without reference to a temporal landmark (e.g., ‘in 2 months’), mailings that described the future savings opportunity as occurring shortly after a fresh start date (e.g., ‘after your next birthday’) increased take-up of the future savings opportunity,” Beshears, Dai, Milkman and Benartzi write.
Moreover, they add that fresh start framing appeared to increase cumulative savings contributions over the eight months following the mailing by roughly 25% more than other mailings sent during the experiment.