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Goal Setting and Saving in the FinTech Era

Journal: Journal of Finance

Date: 20240601

Author: Gargano, Antonio; Rossi, Alberto G.

Abstract:
We study the effectiveness of saving goals in increasing individuals' savings using data from a Fintech app. Using a difference-in-differences identification strategy that randomly assigns users into a group of beta testers who can set goals and a group of users who cannot, we find that setting goals increases individuals' savings rate. The increased savings within the app do not reduce savings outside the app. Moreover, goal setting helps those individuals previously identified as having the lowest propensity to save. Matching App user survey responses to their behavior highlights the relative merits of monitoring and concreteness channels in explaining our findings.

Link: Google Scholar

Key Findings

Setting Goals Doubles Savings

Users who set savings goals through the FinTech app doubled their monthly savings rate from €28.75 to €57.49 on average.

Goal Setting Benefits All Users

Even users traditionally prone to undersaving significantly increased their savings after engaging with goal setting features.

Monitoring Drives Success

57% of users reported that the ability to monitor progress was the most motivating aspect of having savings goals.

Impact of Goal Setting on Monthly Savings

  • Net deposits increased by €28.74 per month when users set goals
  • Deposits increased by €34.56 while withdrawals only increased by €5.60
  • The effect remains stable across different user groups

Goal Categories Distribution

  • Generic "Savings" category represents about 45% of goals
  • Travel is the most common specific category at 20%
  • Car, Hobby, and House each comprise less than 10% of goals

Most Motivating Aspects of Goal Setting

  • 57% cite progress monitoring as most motivating
  • 28.5% motivated by goal purpose
  • 10.4% motivated by having a deadline

Contribution and Implications

  • First large-scale evidence that soft commitment devices can effectively increase savings
  • Demonstrates that FinTech apps can help correct behavioral biases in saving decisions
  • Provides insights for financial institutions implementing goal-setting features
  • Shows potential for scalable intervention to improve household financial outcomes

Data Sources

  • Savings impact data from Table VI showing regression results of goal setting on deposits
  • Goal categories distribution from Figure 3 bottom-right panel
  • Motivation aspects data from Figure 9 Panel A survey responses