Planning for Tax-Time Savings

27 Pages Posted: 10 Sep 2019

See all articles by Melissa A. Z. Knoll

Melissa A. Z. Knoll

Consumer Financial Protection Bureau

Cheryl R. Cooper

Consumer Financial Protection Bureau

Heidi Johnson

Consumer Financial Protection Bureau

Dave Sieminski

Consumer Financial Protection Bureau

Mohin Banker

Yale University

Date Written: September 10, 2019

Abstract

This report presents the results of a large-scale field experiment that the tax preparation company H&R Block (the Company) conducted in collaboration with the Consumer Financial Protection Bureau (the CFPB). The field experiment investigated whether customers could be encouraged, through consumer communications with and without the offer of a small financial incentive, to use a savings feature on a prepaid card to save a portion of their tax refunds from all sources, including state and federal refunds. Consistent with its charge to provide opportunities for consumers to access “wealth building and financial services during the [tax] preparation process, the CFPB was particularly interested in whether consumers who receive the Earned Income Tax Credit (EITC) would be receptive to messages about saving.

The Company encouraged tax-time saving through consumer communications. In December, 2016, before the tax filing season, the Company sent two different types of emails to its prepaid card customers: (1) an email simply encouraging customers to use the savings feature on the prepaid card at tax time; and (2) an email offering small monetary incentives ($5.00) to encourage customers to use the same feature at tax time. The Company used randomization as part of the trial in order to send either one of the two emails to its prepaid card customers. As part of the randomization, some customers were assigned to not be sent any savings-related emails, and these customers served as a comparison for those who did receive savings-related emails.

While take-up of the savings feature was low, results show the savings-related emails from the Company increased customers’ likelihood of using the prepaid card savings feature. These savings persisted beyond the end of the tax filing season, with about 24 percent of customers who deposited into the savings feature during the trial period maintaining savings about eight months after the tax season ended. Among the subset of customers who deposited during the trial period and consented to provide their tax data, those who used a RAC were significantly less likely to deposit into the savings feature at any point during the trial than those who did not use a RAC, and those with larger EITC were more likely to save during the trial period.

The results from this study suggest that simple, timely messages and small incentives can be effective at encouraging consumers interested in non-traditional savings vehicles to save.

Suggested Citation

Knoll, Melissa A. Z. and Cooper, Cheryl R. and Johnson, Heidi and Sieminski, Dave and Banker, Mohin, Planning for Tax-Time Savings (September 10, 2019). Consumer Financial Protection Bureau Office of Research Reports Series No. 19-6, Available at SSRN: https://ssrn.com/abstract=3450789

Melissa A. Z. Knoll (Contact Author)

Consumer Financial Protection Bureau ( email )

United States

Cheryl R. Cooper

Consumer Financial Protection Bureau ( email )

United States

Heidi Johnson

Consumer Financial Protection Bureau ( email )

United States

Dave Sieminski

Consumer Financial Protection Bureau ( email )

United States
2024359698 (Phone)

Mohin Banker

Yale University ( email )

New Haven, CT
United States
6109306562 (Phone)

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