Spare change investing app Acorns is working with an economist that wants you to skip your Starbucks latte to save for retirement
- Micro-investing app Acorns has appointed a behavioral economist, Shlomo Benartzi, to chair its Behavioral Economics Committee.
- Benartzi will lead an innovative program encouraging people to save more.
- Benartzi's first Acorns-endowed experiment finds people can close savings gap by saving a few bucks everyday.
Acorns, the micro-investing app that encourages users to invest their spare change, has appointed a notable behavioral economist to lead an project that encourages people to save more.
Shlomo Benartzi, professor and co-founder of the Behavioral Decision-Making Group at UCLA Anderson School of Management, will chair the company's Behavioral Economics Committee, according to a statement released on Thursday. Benartzi will work with a team of leading scientists to launch a new program, named Money Lab, to help up-and-coming Americans boost savings and investments."We've solved the first big societal problem: getting people to start investing," said Acorns CEO Noah Kerner. "Now we're focused on how we can combine insights of psychology and economics to create an entire financial system that helps people save and invest - our Money Lab can really make an impact."
Acorns is trying to tap into the human tendencies revealed by behavioral economics to create products that can retain customers and to help people make better financial decisions.
Benartzi's first Acorns-endowed experiment is to test consumers' saving habits, through which he has found more people tend to keep saving as a habit when it's framed as a daily contribution. For example, he found that people were more willing to skip a $5 Starbucks latte every day, rather than making a $150 monthly contribution to their savings - even though it was the equivalent amount of money.
Benartzi has previously worked on programs using nudges to boost financial well being. One program he designed called The Save More Tomorrow was designed to hep employees increase their savings rates over time. It was incorporated into the Pension Protection Act of 2006 to help raise American retirement savings.
Research has shown that despite a historically low unemployment rate and rising wage growth, Americans still are not putting much money aside for savings. According to a survey from Bankrate.com, a consumer financial services company, 20% Americans are yet adding anything to their savings.