Setting and sticking to a budget is a difficult task. But thanks to strides made in financial technology, consumers now have the ability to automate practically any bill payment, as well as a plethora of financial planning tools. However, budgeting can remain a challenge.
Duke University’s financial research lab, Common Cents, teamed up with MetLife Foundation on financial behavioral research and today (Feb. 8) unveiled their findings to help address such issues. Their 2016 annual report encapsulates work focusing on several behavioral intervention programs. The ongoing goal of the joint research effort was to help improve finances for 1.8 million low-to-moderate-income households by providing a better understanding of consumer spending behavior.
“We are one of the first to use social science field experiments within financial organizations to gain scalable behavioral insights that can improve financial decision-making for Americans,” said Kristen Berman, cofounder of Common Cents. “Our goal is to help partners create strategies that benefit LMI consumers in a way that compliments or builds on their business model.”
Through the research detailed in the 2016 annual report, Common Cents and MetLife learned that, while 36 percent of respondents have less than $500 in savings, 92 percent have specific actions in mind to alleviate their financial woes. This means that, while most people know how to dig themselves out of a stressful money situation, over a quarter don’t take action to do so. To provide a solution to this disconnect, Common Cents’ interventions focus on five core areas: improving cash flow management, decreasing expenses, managing debt, increasing short-term savings and increasing long-term savings.
The interventions found in this research included assistance from 17 FinTech companies, credit unions and financial services organizations. One such company, Retiremap, is working with Common Cents to help inform future financial interventions with customers experiencing money issues.
“We’ve partnered with Retiremap, a FinTech financial coaching startup, for a multiyear experiment to design scalable and effective robo-advisors that use psychology and behavioral insights to help users achieve financial goals,” said Berman. “We believe this will increase one-on-one coaching for the populations that need it most.”
In the future, Common Cents plans to continue to partner with various financial institutions in order to help reduce financial burdens by providing smart planning solutions and guidance.