Goal Setting and Saving in the FinTech Era
71 Pages Posted: 13 May 2020 Last revised: 10 Sep 2021
Date Written: April 9, 2020
We study the effectiveness of soft, self-designed commitment devices, i.e. saving goals, in increasing individuals' savings using data from a FinTech App. We establish that setting goals increases individuals' savings rate and show that the effect is causal using a difference-in-differences identication strategy that exploits the random assignment of users into a group of beta-testers who can set goals and a group of users who cannot. We also show that the increased savings within the App do not come at the expense of reduced savings outside the App and that goal-setting also helps the individuals the literature has identified as the ones with the lowest propensity to save. We explore the economic channels of our results by matching App user survey responses to their behavior and highlight the importance of a monitoring channel, consistent with models where agents experience disutility from falling short of their goal and goal setting reducing individuals' limited attention.
Keywords: Goal Setting, Financial Technology, Saving Behavior
JEL Classification: D14, G41, G51
Suggested Citation: Suggested Citation