Behavioral Economics and the Savings Crisis - Kristen Tyrrell
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Managing your safety net has gotten harder. Having enough money set aside for emergencies, saving for retirement, and even getting the right insurance is confusing and expensive. Why is that? How can we build solutions that help provide stability in the face of increasing income volatility, short-circuited reward systems, and systemic challenges? In this webinar our guest Kristen Tyrrell will highlight the challenges of the current savings crisis and dive deep into framing behavioral economic solutions for new ways to build financial security and grow wealth. In this webinar, you’ll learn: - What is a financial safety net? - What is the savings crisis? - Why is it so hard to save? - What can we do to make it easier?
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Behavioral Economics and the Savings Crisis - Kristen Tyrrell
- 1. @WomenInno Welcome to Innovation Women Speak! Webinar Series
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- 5. COMING UP! Ready for Totally Different Healthcare? Wearables and Mobile Move Health into Your Home April 3, 2019 12:00-1:00 p.m. ET Managing your safety net has go0en harder. Having enough money set aside for emergencies, saving for re8rement, and even ge9ng the right insurance is confusing and expensive. Why is that? In this webinar, you’ll learn: • What is a financial safety net? • What is the savings crisis? • Why is it so hard to save? • What can we do to make it easier? Featuring Candice Hughes PhD, MBA and serial entrepreneur in digital health and biopharma, neuroscien8st, author, speaker
- 6. Innovation Women Speak! Webinar Series Behavioral Economics and the Savings Crisis Managing your safety net has go0en harder. Having enough money set aside for emergencies, saving for re8rement, and even ge9ng the right insurance is confusing and expensive. Why is that? In this webinar, you’ll learn: • What is a financial safety net? • What is the savings crisis? • Why is it so hard to save? • What can we do to make it easier? Featuring Kristen Tyrrell COO, Catch
- 7. Behavioral Economics & the Savings Crisis How we got here, what to do
- 9. 9 Savings liquid, short-term, fractional income Investment semi-liquid, future proofing, growth asset Insurance catastrophic, risk- pooling, income agnostic Credit medium-term, flushed liquidity, liability Financial security having enough of each pillar when you need it
- 10. 10 Why is saving money important?
- 11. 11 We are in a savings crisis. 1970 12 % Today 3 %
- 12. 12 Savings Retirement $400 40% $1,000 70% $0 21% <$5,000 33% $1M+ 0.04%
- 13. 13 Why aren’t we saving more?
- 14. Senator Chuck Grassley R-Iowa Americans “are just spending every darn penny they have, whether it's on booze or women or movies.”
- 15. Tim Gurner Australian Millionaire "When I was trying to buy my first home I wasn't buying smashed avocados for 19 bucks and four coffees at $4 each.”
- 16. 16
- 17. 17 High Prices spending more on the same things Housing Health Education +74% +76% +100% Expensive Savings earning less on the money you put away 12% 5-year CD in 1978 3% 5-year CD in 2019 Stagnant Income not having enough money to save 0% 3% 99%
- 18. 18 Family Impact volatility insecurity dangerous debt Societal Impact inequality instability poor health, revenue
- 19. 19 Why can’t we fix it (more easily)?
- 20. 20 Technology + Self-Control Short-term rewards incentivized by corporations and media Decision Making Overload Choice is increasingly available, but information is not trustworthy Poverty Impacts Stress Neural responses to stress can limit ability to plan for the future
- 22. 22 Homo Economicus is a myth. $250 @ 100% $1000 @ 25%
- 23. 23 Affect Anchoring Availability Forecasting Inertia Salience Empathy Gap Time Discounting Diversification Bias Inequity Aversion Social Norms Food preservatives. Good or bad? Most people would say they’re bad. There is an emotional response that often outweighs the positives because of the negative, despite the size of both.
- 24. 24 Affect Anchoring Availability Forecasting Inertia Salience Empathy Gap Time Discounting Diversification Bias Inequity Aversion Social Norms Does the average person make more or less than $100k/year? How much? Most people know the answer is less. But with the “anchor” of $100,000, people will dramatically overestimate what the average actually is. Works with high and low estimates.
- 25. 25 Affect Anchoring Availability Forecasting Inertia Salience Empathy Gap Time Discounting Diversification Bias Inequity Aversion Social Norms How long will it take you to finish that project for work? We’re all too optimistic. Even when we have past experience that tells us things will take longer than we think, we are still unable to correct for our forecasting heuristic.
- 26. 26 Affect Anchoring Availability Forecasting Inertia Salience Empathy Gap Time Discounting Diversification Bias Inequity Aversion Social Norms If your political party changed it’s priorities, would you re-register under a different party? Eh. Maybe eventually. It’s kind of inconvenient, and does it really even matter that much anyway?
- 27. 27 Affect Anchoring Availability Forecasting Inertia Salience Empathy Gap Time Discounting Diversification Bias Inequity Aversion Social Norms Would you steal food or rob someone to be able to feed your family? When you’re in a “cold” (rational) state, you’d probably say no. But because it’s hard to understand emotional and visceral responses (fear, anger, arousal) when you’re not in that “hot” state, you may not understand how people would actually act.
- 28. 28 Affect Anchoring Availability Forecasting Inertia Salience Empathy Gap Time Discounting Diversification Bias Inequity Aversion Social Norms Would you prefer $100 now or $110 in a month? It’s not linear, but you’ll almost alway over-value the present to the future. A 10% gain in one month is pretty good, but the fact you wouldn’t have it now is kind of a drag.
- 29. 29 Affect Anchoring Availability Forecasting Inertia Salience Empathy Gap Time Discounting Diversification Bias Inequity Aversion Social Norms Should you get the variety pack of cereal? Often, people will go for more flavors, even though they only like 1 or 2. Simply having more choices is viewed as an asset, even though it isn’t actually. You’d be better off with a big box of your favorite cereal.
- 30. 30 Affect Anchoring Availability Forecasting Inertia Salience Empathy Gap Time Discounting Diversification Bias Inequity Aversion Social Norms Would you prefer everyone at the company get a $100 bonus, or half the people get $200 bonuses? Related to people liking guarantees, there’s often a preference for everyone to get the same outcome.
- 31. 31 Affect Anchoring Availability Forecasting Inertia Salience Empathy Gap Time Discounting Diversification Bias Inequity Aversion Social Norms Would you pay a family member who cooked a meal for you? These vary dramatically across cultures, but are often outside of what would be considered strictly rational.
- 32. 32 Behavioral Economics Heuristics Aren’t necessarily mutually exclusive Compound effects Vary between people and cultures Aren’t strictly logical, but are often intuitive Make it hard to guess what behavior will be
- 33. 33 What can we do to improve things?
- 34. 34 Nudge use positive reinforcement and indirect suggestions to alter behavior
- 35. 35 The ethics of Nudge Theory - Marketing - “Bad” outcomes - Brain washing - Impact on individual - Limiting free will Manipulation CONCERN - Actively designing choice - Limiting overload - Thoughtful defaults - Agreed upon outcomes - Allowing divergence Choice architecture SOLUTION
- 37. 37 We will use behavioral economics to drive outcomes that we think will benefit the vast majority of users — especially around financial security. We welcome discussions around the nuance and balance of when, where, and how nudges and choice architecture are applied.
- 38. 38 Outcomes saving more money saving more often investing more money investing more often automating saving/investing filing taxes properly understanding jargon limiting choice overload
- 39. Plan catch up Single contribution Always/never income Prize-linked savings Guide API integrations Onboarding IRA rollover Paycheck percentage IRS e-file Direct deposit Plan updates Examples
- 40. For a new personal safety net that is accessible, affordable, and effective.
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