AgeLab Postdoctoral Associate Dr. Martina Raue gave a presentation on the effects of social comparisons on savings behaviors at the https://www.rand.org/events/2017/10/24.html" target="_blank">RAND Behavioral Finance Forum, sponsored by AARP and PNC and held at the PEW Charitable Trusts headquarters in Washington, D.C. The annual forum brings together academics and practitioners to share behavioral research on financial decision-making.
This year’s forum focused on financial decision-making as it relates to aging, debt and credit, retirement planning, investments and disclosure.
Dr. Raue presented two experimental studies that examined the effects of social comparison approaches on savings behaviors. Social comparison may be a tool through which to promote savings behaviors, as comparing oneself with those who are doing better can provide the inspiration to improve and motivate people to act. In addition, people’s comparisons of themselves with others may help them to reduce uncertainty about their choices for the future and decisions around saving for retirement. Empirical evidence for the effectiveness of a social comparison approach to encourage savings behavior, however, is limited.
The experiments’ findings showed that participants who had been categorized at the lower end of a comparison scale were more likely to make changes to their savings. Among those who made changes, savings rates increased. In general, participants were more likely to change their behavior when they perceived their performance as being average or below average relative to others.
The results suggest that a social comparison approaches may be promising means to motivate people to start saving for retirement or increase their current savings.