Soft versus Hard Commitments: A Test on Savings Behaviors

Jeremy Burke, Jill Luoto and Francisco Perez‐Arce

Journal of Consumer Affairs, 2018, vol. 52, issue 3, 733-745

Abstract: Commitment devices restricting future behavior have demonstrated promise in helping individuals improve their savings behavior, yet often suffer from low take‐up. We test a new “soft” commitment account that asks borrowers to think about their savings goals, how it would feel to achieve them, and make a pledge to work toward these goals, yet has no external restrictions on savings behavior. In a six‐month randomized experiment among consumers that find it difficult to meet their savings needs, we find that such soft commitments can significantly increase initial savings relative to either a hard commitment account (that prevents withdrawals) or a traditional savings account. In addition, the soft commitments significantly increased final savings balances relative to no form of commitment and were particularly effective for impatient individuals. Despite the lower initial take‐up, the hard commitment account proved most effective in building savings balances among our participants at the end of 6 months.

Date: 2018
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