Enrich Clients’ Savings Deposits

There are retailers who make money by having customers save money instead of spending money. These are the insurance agents, CPAs, attorneys, banks, and others who provide financial planning services.
     How to sell the idea of depositing money? Researchers at University of Southern California  first defined two concepts:

• Goal specificity refers to how precise a savings goal is. “I want to save $3,000 this year” has high goal specificity. “Over the next few years, I want to save as much as possible” has low goal specificity. 
• Construal level refers to how much the consumer is thinking about why to save and how much about how to save. 

     It might seem that people end up putting more money away if they have highly specific goals and if their thinking balances why to save with how to save. However, the researchers conclude that what makes a difference is the time horizon of the goal:

• If the consumer has a long-range objective, such as retirement in twenty years, emphasize why they want to save and discuss specific dollar figures. What amount do they want to end up with, and what amount do they need to deposit each month to accomplish the goal? Although both are important, “why to save” counts for more than “how to save” when perseverance is required.
• If the consumer comes with a short-term savings objective, such as making the down payment on a house, the consumer is likely to save more if moving beyond the “why” to the “how” and if encouraged to deposit as much as possible. 

     Researchers from University of Toronto asked, “Will people save more if they have multiple goals or a single goal?” At first glance, it could seem that the more goals, the more motivation to save, and therefore the more money saved.
     Surprisingly, the research finds that, in general, people with one important savings goal will deposit more. The reason turns out to do with tradeoffs. Consumers realize they can put away in savings only so much. Therefore, when they have multiple goals, the consumers spend mental energy considering the advantages and disadvantages of each goal. This process activates the “why” and leaves less energy for the “how.”
     This is okay if the client will find it easy to save. But if, as is usually the case, saving money requires the client to strictly budget, encourage the client to put primary importance on a single goal.

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