Testing Strategies to Increase Saving and Retention in Individual Development Account Programs

Abstract

In a series of field experiments we test whether saving and retention rates in a federally funded, matched savings program for low-income families – the Individual Development Account (IDA) program – can be improved through the introduction of program features inspired by behavioral economics. We partnered with eight IDA programs across the U.S. who agreed to randomly assign participants to different experimental conditions. We test the impact of four revenue-neutral changes in key program features: a) holding savers accountable for making savings deposits through phone calls before and after the deposit deadline, b) an increase in the frequency with which deposits are made from monthly to bi-weekly, c) the introduction of a lottery-based incentive structure, whereby match rates are determined in part by a lottery at the time of each deposit, and d) an increase in the savings match from $2 for every $1 saved to $4 for every $1 saved when half of the savings goal was reached. None of our four interventions had the desired effect of increasing savings. To explain the null findings, we speculate that liquidity constraints, rather than cognitive biases, were the primary impediment to saving.