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Expert comment on the Money Advice Service (MAS) finding 16m have savings of less than £100 PDF Print E-mail
Friday, 30 September 2016
Commenting on the Money Advice Service (MAS) finding 16m have savings of less than £100 Ivo Vlaev, of Warwick Business School, is a Professor of Behavioural Science and co-authored the Mindspace report for the Cabinet Office on using behavioural science in policymaking. He has also advised MAS, the Financial Conduct Authority and the Financial Reporting Council.  

Professor Ivo Vlaev said: "How to get people to save more is a constant problem for governments around the world. Traditionally, behaviour change has been seen through the lens of ‘changing minds’. But behavioural science shows that ‘changing contexts’ can have a powerful effect on behaviour: we can change behaviour by sometimes quite subtle changes to the environment or context within which decisions are made.

"Some insights from behavioural science show that to save it’s always good to see what you are saving for; so use a picture and statement in order to create an emotional bond to the goal. Then develop a three-month saving goal with monthly targets.

"Try to identify expensive spending habits and substitute those habits with less expensive, but just as rewarding, alternatives and so preserving the cue-action-reward habit loop.

"Use a credit-card paper sleeve on which to record spending and thus remind yourself about your substitutions. You will be pleasantly surprised at how much money you are saving after each substitution. Also work with a buddy – somebody who has similar issues with spending.

"Regularly – daily or at least twice per week – check your online account and associate checking it with something your enjoy doing in a specific situation. For example, during your lunch break or before checking facebook. In so doing you will develop an (automatic) habit of checking your online accounts by paired-associate learning between a situational cue (lunch break), an action routine (checking balance), and a rewarding experience (lunch or online socialising).

"The basic insight of behavioural science is that human behaviour is guided not by the dictates of rationality embodied in a super-computer that can analyse the costs and benefits of every action. Instead, it is led by our very human, sociable, emotional and sometimes fallible brain. In a nutshell, the mental shortcuts that serve us so well in much of life can also get us into trouble, both as individuals and as societies."

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