The Retirement Savings Challenge
Saving for retirement is not always straightforward, in part because for many it feels so distant that there is no sense of urgency. New research proposes a solution: make the future feel closer. People struggle to save for the future because they struggle to connect with their future selves, according to Katherine Christensen, assistant marketing professor at Indiana University and lead author of the study.
We wondered, based on past research, if people felt more connected to their future selves, would they be more likely to save?
Research Findings and Experiments
After conducting and analyzing 20 experiments to test this hypothesis, Christensen states the answer is yes. The research found that when thinking about the future, more than 80% of the time people start by thinking about the present. Researchers flipped this by starting the thought process with the future before turning back to present savings goals needed to achieve it. While subtle, this difference motivates people to save more.
Real-World Experiment Results
In one experiment with over 6,700 customers of a Swedish fintech company, individuals with low-balance savings accounts were 14% more likely to invest in a long-term savings product when receiving notifications prompting future-first thinking.
The year is 2034… rewind back to 2024 and consider saving for 2034 you.
Practical Application for Savers
Though tailored for institutions like banks, Hal Hershfield, professor at UCLA and study co-author, notes individuals can apply the findings using similar wording. The key is to start in the future and rewind back, rather than the traditional approach of starting now and projecting ahead.
Psychological Foundation
The hypothesis draws from earlier findings that outbound trips to unfamiliar places feel longer than identical return trips, due to uncertainty creating mental distance. This 'going home effect' applies to time as well as miles, making the familiar present anchor the uncertain future closer. You're more likely to save for a future that feels imminent. By anchoring with present-day reality, uncertainty decreases, moving toward certainty.
Since the present is more certain than the future, we're reducing the feeling of uncertainty by anchoring subjects with a mental destination of familiar present-day reality.
