In what may be a vote of redemption for much-maligned text messaging, a recent study by a team of economists, including Dartmouth economics professor Jonathan Zinman, has found that when individuals received text messages reminding them to save, their account balances increased on average by 6 percent.
The study found that the tendency to not save money is due to a lack of attention to saving, rather than a lack of self-control.
The economists worked with three banks in Bolivia, Peru and the Philippines to monitor the savings patterns of new bank clients. Participants set personal savings goals at the beginning of the six-month study and periodically received text message reminders to deposit money in their accounts.
The banks sent several types of text messages with varying degrees of positive and negative language.
"Frequent deposit into the Gihandom Savings account will make your dream come true. A reminder from 1st Valley Bank," read a message from the bank in the Philippines that was cited in the study.
Of the various types of text messages, the most successful were those that included a reminder of account holder's personal goal, because they increased the incentive to save these messages boosted savings by nearly 16 percent, the study found. Messages that used negative language to emphasize the importance of saving had little effect on savings rates.
Zinman conducted the study in collaboration with Harvard University economics professor Sendhil Mullainathan, Yale University economics professor Dean Karlan and California Institute of Technology graduate student Margaret McConnell.
Studying the effects of reminders on habits is a new area of economics, Zinman said in an interview with The Dartmouth.
In the future, the researchers will try to replicate the study in the United States, Zinman said, adding that they are currently working with one financial institution and are looking for another to partner with.
Carol Kaplan, spokeswoman for the American Bankers Association, which was not involved the study, said Americans deposit money in response to economic conditions in which there are large job losses and high credit delinquencies.
"Americans obviously didn't need text messages to spend less and save more, as Federal Reserve figures have shown for the past several quarters," Kaplan said in an interview with The Dartmouth.
A previous study Zinman conducted found that individuals who completed a survey on health status, health risks and household finances were more likely to purchase health insurance when offered it by marketers.
"I have some other work on limited attention, [in unpublished] states, that suggests that surveying people can inadvertently remind them of decisions that are important," Zinman said.
A similar study by Victor Stango, a University of California, Davis professor and former Tuck School of Business professor, found that participants were less likely to accumulate overdraft fees after taking a survey mentioning checking account overdrafts. In addition, when the survey mentioned overdrafts more frequently, participants were more likely to avoid overdraft fees for a longer time period.