Can Email Reminders Help Fix the Savings Crisis?

Nearly 40 percent of Americans have less than a month of income saved. A third of Americans have no emergency savings at all. And most people, even those with access to a defined contribution plan at work such as a 401(k), are not saving enough for retirement.

“One unexpected major expense—like replacing a broken refrigerator—would put a quarter of Americans into expensive debt, or at the very least, throw their life plans off balance,” says Sean Ellis, the director of analytics at the University of Pennsylvania’s Behavior Change for Good Initiative. “It is a serious issue.”

Ellis, along with a team led by Wharton professor Katherine Milkman and joined by Kellogg professor of economics and finance Dean Karlan, sought to leverage their expertise in behavioral economics to help address this concerning trend.

“We had tested reminders to save internationally before and were left with the sentiment that messaging can work, but much needed to be tested to learn how best to do it and whether long-run behavior can change,” says Karlan, who also serves as codirector of Kellogg’s Global Poverty Research Lab.

The researchers partnered with a large bank to explore the potential of a simple technological nudge—email reminders—to encourage people to save more money for emergencies. After sending a variety of different types of email reminders to nearly two million of the bank’s U.S. customers, they found that, as a whole, receiving the reminders increased the likelihood that a customer would make a one-time savings deposit in a given month by 0.51 percent.

Though the increase in deposits was relatively small on an individual level, it was large relative to the tiny cost of sending the messages. Had each of the customers received the team’s top-performing email reminder, the study estimates that they could have collectively saved millions of dollars more over the study’s two-month period.

“A lot of the need for more Americans to save is caused by structural issues that no single study can solve,” Ellis says. “But if we can make a difference around the edges and help people improve even a little bit—that, I think, is very meaningful.”

A simple nudge

The team’s email savings campaign tested a variety of different ideas designed by 20 different scientists. This tournament-style method of simultaneously testing many ideas developed by a wide range of scientists is a signature method of research—a “megastudy”—pioneered by the Behavior Change for Good Initiative, where Karlan is a team scientist.

Milkman, Ellis, Karlan, and their colleagues ultimately tested seven different types of email reminders, each designed to encourage people to transfer money from their checking account to their savings account. The emails differed in their frequency (e.g., weekly or monthly), timing (e.g., near the beginning or end of the month), and content (e.g., a plain congratulatory note or an inspirational quote about saving). Some emails were also triggered only if and when a customer made a deposit of at least $300 into their checking account.

“The reminder didn’t just tell people to save,” Ellis says. “It gave them a call to action to make a one-time or recurring transfer, because giving someone a specific action tends to be much more effective than just a general encouragement.”

The researchers sent these email reminders to 1,925,785 U.S. customers of a large, international bank from March 1 through April 29, 2022. The customers were limited to adults who had a 90-day average savings-account balance of $0 to $25,000, and each customer received just one type of email reminder or no reminder at all.

Moving the needle

Overall, the email reminders had a positive impact on customer deposits.

The collective email campaign increased the likelihood of a customer making a one-time savings deposit by 0.05 percentage points: 9.93 percent of customers who received an email reminder made a one-time deposit into their savings account in a given month, compared with 9.88 percent of customers who did not receive a reminder.

For the top-performing email reminder, the monthly deposit rate was 10.01 percent—an increase of 0.13 percentage points. This winning campaign featured a weekly reminder to save or a weekly congratulatory note for those who had already made a savings deposit in the past seven days.

“One of the key takeaways is that weekly reminders are better than either monthly or event-triggered emails,” Ellis says. “And shorter, more concise emails also seem to be better.”

Following up on their two-month test, the researchers found that the reminders continued to encourage people to save.

The likelihood for customers who had previously received an email reminder to make a savings deposit increased by 0.9 percent up to one month later, compared with those who had not received a reminder.

“These are extremely light-touch interventions—all we did was change the information in an email, an essentially costless change—and we were still able to meaningfully move the needle,” Ellis says. “If we were able to put a little bit more swing or oomph into our interventions, say, by using an approach other than emails or potentially offering incentives to customers, these small savings could potentially become that much more meaningful.”

Such efforts to better understand and improve savings habits, “when scaled with the added creativity brought in through Milkman and coauthor Angela Duckworth’s megastudy approach, can help further the effort to bring evidence to policy,” Karlan adds.

Ramping up growth, riding out shocks

The study’s practical lessons about email nudges could benefit not just banks but the general business community as well, according to Ellis.

“If I was a manager of a business—whether that’s in an investment context of trying to get people to invest more or in a business context of trying to drive up sales—reaching out to the existing customer base and applying some of these principles is definitely an avenue I’d be interested in exploring,” he says.

And for financial institutions or organizations seeking to ramp up outreach and growth, Ellis says the findings are “a call to action to give behavioral scientists the room and the space to actually implement heavier-touch, more-meaningful interventions over longer periods of time.”

On a broader societal level, the study reinforces the importance of getting people into the habit of saving.

“A key, under-discussed macroeconomic metric is how stable the economy is—if it is able to withstand shocks,” Ellis says. “And at the most micro level, that comes down to the household and its ability to ride out unexpected events. Helping more Americans have enough savings when these unexpected things come up is extremely important, because that alone helps make the U.S. economy more stable.”