In the United States, more than 45 million people live below the poverty line, including one in five children who will experience its long-lasting effects. While public benefits programs meaningfully impact countless lives by providing essentials like food and health care, many people who are struggling do not receive these benefits for a variety of reasons. Often people who are eligible and really need these services lose out, and not necessarily because of a deliberate decision to forego them—hidden behavioral barriers can be at play, preventing individuals and families from getting what they need.

By applying insights from behavioral science, vital benefits programs can expand their reach and effectiveness. We have previously examined poverty through a behavioral lens and outlined initial steps for tweaking anti-poverty programs and services to align more closely with the way people act and behave in the real world. Key steps include cutting costs (reducing hassles that may accompany many well-meaning programs), creating slack (building in cushions of time, money, and attention), and reframing and empowering (affirming autonomy and dignity). We have been employing these insights through a number of government partnerships since then, and findings demonstrate the value of behavioral science to increase program impact.

For instance, in New York City 44% of Supplemental Nutrition Assistance Program (SNAP) cases close at recertification or miss one or more months of benefits. That’s around 16,000 people losing benefits each month. Many of these clients return to using SNAP (formerly known as food stamps) after missing the recertification, but they must re-enter as applicants—a process that is much more burdensome for them and the NYC Human Services Administration (HRA).

Because it was clear that many recipients have the intention to recertify but fail to follow through, we worked with HRA to craft a behaviorally-informed reminder notice that leveraged loss aversion (reminding people they would lose their benefits if they didn’t act) and other subtle cues to encourage people to recertify (and do so early to minimize logistical issues). Clients who received our reminder were 5.5% less likely to miss the form submission step than clients who did not. And importantly, 45 days into the recertification period, reminder recipients were 12.9% more likely to have submitted a recertification form than other clients.

We’re tackling low utilization with another partner as well: the Supplemental Nutrition Program for Women, Infants and Children (WIC). WIC is an effective program that improves babies’ health at birth, reduces health care costs, and creates better educational outcomes. Yet fewer than 65% of eligible families reap these benefits by using the program, and participation tends to drop further as children age.

With our behavioral science approach, we have uncovered many bottlenecks contributing to low uptake and high dropout, from ambiguity about which foods are eligible, to scheduling challenges, to misconceptions of who is intended to use WIC. From our initial deep dive into the WIC program in San Jose, CA, we will work with local WIC agencies in California to design and test solutions to overcome these bottlenecks and help more people benefit from the services it offers.

This is only the beginning of what we think can be achieved by applying simple, cost-effective behavioral insights to public programs on which millions of Americans rely. For example, the SNAP reminder notice, if scaled up to cover all NYC SNAP clients, would lead to over 5,000 more people each year successfully taking the first step to maintain important benefits for themselves and their families. And after testing new designs with WIC in San Jose, successful interventions can be adapted not only for other WIC programs across the country but for similar antipoverty programs. We will continue building on these efforts to use behavioral science to maximize the impact of public programs, helping benefits reach more people who need them.

The post From WIC to SNAP: Benefits Programs Go Farther with Behavioral Science appeared first on ideas42.

This post originally appeared on NextBillion. 

Imagine you just received the news that you have a serious but treatable medical condition. What would you think about? Perhaps you would fear for your health, or worry about what the treatment’s side effects might be. In a recent study, participants were asked what they would think about after receiving that news. Most people thought about how they would feel (either worried or relieved), but lower-income participants were also far more likely to report thinking about the cost of the medical care.

This telling study highlights the extent to which poverty impacts mental energy and decision-making. The relief that the condition is treatable is soon dwarfed by the fear of not being able to afford care. This effect isn’t just limited to health emergencies. For people living in poverty, it is common for one event to quickly start two trains of thought – one about the problem and the other about how to pay for it.

Studies show that juggling two trains of thought like this ultimately consumes more of a type of mental energy called cognitive bandwidth. Cognitive bandwidth allows humans to reason, focus and resist impulses. Unfortunately, we have only a limited amount of it, which means we can only pay attention to, think about or remember a certain number of things at one time. As a result, all people struggle to make decisions when they run low on cognitive bandwidth. Think back to the last time you overslept and forgot your keys, or when you were busy at work and made a decision you later realized was not the best one. Imagine feeling that way almost all the time and how it would impact your day-to-day decision-making.

In fact, it is people who are living on the financial edge that are the most likely to have to make decisions at low-bandwidth moments. Of course, they are also the least able to afford the consequences of a poor decision.

Fortunately, there are ways to help people make good decisions at low-bandwidth moments. One simple but powerful tool that can make choices easier when bandwidth is taxed is a simple reminder. Receiving a well-timed reminder can help people make key decisions – like repaying a loan – at the right time. Without reminders, many of us struggle to keep track of plans or due dates; doubly so at low-bandwidth moments. That’s why a system of well-timed reminders has proven to be so effective around the world in diverse situations: from increasing repayment among small business borrowers in Uganda to helping microloan borrowers in the U.S.

Many tools to fight poverty work in a similar way: They target one important decision, identify cognitive hurdles and remove them. Unfortunately, the challenges of poverty aren’t confined to a single decision and barriers aren’t always removable.

A more robust approach to poverty alleviation is to try to boost a person’s bandwidth consistently so that they are always in a better position to surmount hurdles as they arise. For example, a study in India demonstrated that, for people who lack sufficient financial resources, getting more money is not just good for its own sake, it also increases mental bandwidth. Sugar cane farmers are paid once a year at harvest time, and researchers measured their bandwidth with a visual logic test right before and then just after harvest. They found that the farmers had more cognitive bandwidth after receiving their harvest income than before. So it’s clear that the benefits of getting paid weren’t just monetary, but also cognitive. Organizations that fight poverty can use this knowledge to help people. For example, GiveDirectly, a nonprofit that operates in Kenya and Uganda, puts this principle into practice by sending cash transfers to poor households in developing countries. As expected, these cash transfers (which have no conditions attached) improve economic outcomes for participants. Beyond that, the transfers also increase happiness and life satisfaction and reduce depression.

Increasing the amount and steadiness of income isn’t the only way to free up mental energy. We can achieve similar effects by identifying what things eat up bandwidth and then targeting them. The Behavioral Design Project for Promoting Financial Health, managed by ideas42 and supported by JPMorgan Chase Foundation, teaches nonprofit practitioners how to apply behavioral design tactics within their own organizations, which includes strategies for identifying and addressing bandwidth issues and barriers. Participants are using behavioral science insights to shape programs and services that give their beneficiaries financial and cognitive breathing room.

For instance, participating organization Neighborhood Trust Financial Partners, in conjunction with technology firm FlexWage, is developing an innovative new tool that employers can provide to help lower-income employees better manage their finances. This tool, called WageGoal, has the potential to free up cognitive bandwidth in two ways. First, it gives employees better visibility into their upcoming income and expenses, removing the need to constantly juggle their cash flows. Second, it provides employees with access to wages they’ve already earned until payday arrives. This financial “cushion” not only helps cover unexpected costs but importantly also alleviates anxiety created by having to meet urgent financial needs.

It is clear that programs that aim to build bandwidth, in addition to helping beneficiaries get through low-bandwidth moments, will have broader, long-term impact in tackling poverty. As research reveals the potential for programs to do more, they should adopt and integrate new approaches to create effective, innovative tools for alleviating poverty. Creating simple ways to free cognitive bandwidth, whether through money or time, can help elevate helpful programs into transformative ones.

Katy Davis is managing director at ideas42. Colleen Briggs is executive director of community innovation at JPMorgan Chase.

Photo of Indian sugar cane farmers by Giridhar Appaji Nag Y via Flickr

The post Runaway Trains of Thought: How Boosting Cognitive Bandwidth Can Fight Poverty appeared first on ideas42.

What is the cost of making a late loan payment? If you’re like most people, you probably think of late fees. But there are also less visible, longer-term consequences that can have a serious impact on financial wellbeing. For example, late payments affect credit scores, which in turn can affect the ability to access credit later—and people are not always aware of these impacts. While in our daily lives we’re surrounded by messages about the importance of monitoring these scores, with plenty of free products for doing so, when is the last time you actually checked your credit score? And what are you supposed to do with that number and all the complex, unseen factors that produced it? It’s no surprise that most of us are left confused and don’t often take active steps to improve our standing, even though it can affect access to future credit.

Case in point: in a national 2015 survey, 35% of Mexicans reported the rejection of a loan application due to problems in the Credit Bureau. This is due at least in part to the fact that nearly 30% of people had a credit score of 660 or below (which lenders consider to be medium to high risk of non-repayment), according to a 2014 national representative study. Yet there is evidence that expanded access to credit can produce significant benefits for borrowers—from job retention to higher incomes.

To tackle this problem, we’ve partnered with kubo.financiero, the first regulated peer-to-peer online lending platform in Mexico. By creating a digital community connecting borrowers with investors, kubo cuts costs, increasing access to affordable loans in a country with some of the highest interest rates in Latin America. This is a boon for many people, but despite the flexibility in repayment schedules, many clients still make late payments over the course of their loans. In addition to paying late fees, these clients may be losing out on future opportunities for financial support, without even knowing it.

We spoke with clients to learn what causes them to pay late and uncovered a variety of different behavioral barriers that can get in the way. One key obstacle is the tendency to focus on the more salient consequences in the present, rather than those that may emerge later. While most were aware of the immediate costs like late fees and having to catch up on payments, almost no one mentioned the longer-term effects on their credit score and access to future loans. And people with an understanding of the future consequences may downplay them and instead prioritize other pressing issues like providing for their families.

Given the focus on the day-by-day finances, it’s not surprising that most clients don’t have concrete plans for how they’ll pay back their loans on time or get themselves back on track if they experience an unexpected financial shock. Many clients have goals, but rather than creating a set of clear steps they can take in the near term, most had broad strategies to boost their finances, such as “grow my business” or “work harder.”

It makes sense to focus on daily financial needs, of course. But because de-prioritizing loan payments can make it even harder to manage money later on, we want to help people stay on track in order to support their financial futures, too.

That’s why we will collaborate with kubo during the coming months to design interventions that address these obstacles in an effort to reduce late loan repayments. By harnessing insights about the context and client behavior—of which the above are just a sampling—we’ll be able to create solutions with the potential to strengthen credit scores and preserve access to future lines of credit when they need it.

The post Keeping the Paths to Credit Open in Mexico appeared first on ideas42.

Behavioral Design Project participants and ideas42 staff

Over the last year and a half, we collaborated with 11 financial capability organizations to teach them how to apply behavioral insights to their programs. Each organization identified and tackled an initial problem impeding client financial health by leveraging their unique knowledge of the populations they serve. The reach of the Behavioral Design Project (BDP) for Promoting Financial Health extends beyond solving one problem with behavioral science—instead, our goal was to equip financial capability organizations with the skills they need to continuously apply behavioral insights to their programs and products to maximize impact on clients’ lives. Any organization with a social mission can leverage the insights produced by the participants, whose experiences and takeaways will be documented in a series of case studies.

Last week, we gathered the participating organizations for the closing event of this comprehensive program. Teams shared reflections of their experiences, detailing the initial problem they aimed to address, behavioral barriers, and their design solutions—as well as the challenges they encountered along the way. Additionally, a panel of champions of the behavioral approach, Dr. Elke Weber of Princeton University, Dawn Miller of the NYC Limousine and Taxi Commission, and Erik Johnson of Morningstar, discussed lessons and strategies for using behavioral design at organizations.

Some key points they shared? Think of behavioral design as “making things easier for people,” said Dawn. That’s what it boils down to, and it can feel like a less-daunting task (and even a no-brainer) when framed that way.

Elke added: “Help people achieve something they already want to achieve.” Insights from behavioral science are especially powerful for closing the gap between what people intend to do, such as sign up to be organ donors, and what they actually do (forget to check the box to sign up).

A common mistake organizations make when trying to use behavioral design, Erik stressed, is “focusing too much on the solution at the expense of focusing on the right problem.” Instead of starting with an idea to implement, identify which problems exist before delving into innovative ways to address them.

The three panelists also shared findings from their own work using behavioral science for social good—including helping people applying for a taxi license complete their applications, increasing sustainable practices with defaults, and supporting clients’ financial goals. Our team led discussions on next steps for using behavioral design in organizations, such as how to audit communications and processes and tips for applying the behavioral design methodology to any project.

With the knowledge and methods they need to continue solving problems with behavioral design long after our engagement together ends, these financial innovators are equipped with one more tool for promoting financial health among their clients. Interested innovators can check out our first case study from the program to learn about applying behavioral insights to their own work.

The case study illustrates how the Seattle Housing Authority used behavioral science to reduce fines incurred when their clients move out of an apartment. We’ll be publishing more in-depth analyses of participants from the BDP, so stay tuned and check out this page for more.

The post Learning Behavioral Design, Part 2: How to Embed Behavioral Design in Organizations appeared first on ideas42.

It’s one thing to read about behavioral science or attend a one-time training on how it’s been used to improve programs. It’s another to take those insights and apply them to the real world yourself. That was the driver behind our Behavioral Design Project for Promoting Financial Health, in which 11 organizations actively learned behavioral science and applied their insights to improve supportive programs and services.

While each organization tackled a problem unique to their organization during the project, their insights about what it means to use behavioral science in the real world have wider applications. That’s why we created case studies to share some of the takeaways participants gained from the Behavioral Design Project.

Our latest case study features stories highlighting the 5 key lessons about applying behavioral design to programs. Click the infographic below for a sneak peek at what our participants had to say about each lesson:

Click to expand

To learn how to apply these insights to your organization’s efforts, read the full case study which details each lesson with real-world examples, register for our upcoming virtual panel discussion on November 2nd, and check out our first case study to see how Seattle Housing Authority used behavioral design to help their residents avoid unnecessary fines. Read more about the other participants here.

The post Learning Behavioral Design, Part 3: 5 Lessons for Applying Behavioral Design to Programs appeared first on ideas42.

Photo by Dimitri Ralovason

This post originally appeared on NextBillion. 

Fighting poverty with direct cash payments is more common now than ever before. In 1997, only three developing countries had centrally managed cash transfer programs targeting poverty. Today, more than 120 do, and more than $200 million in cash is distributed daily. The adoption of cash transfers was a significant step in reducing extreme global poverty. Evidence shows that these programs work – both to reduce poverty and to boost human capital. For example, recipients spend the money on essentials like their children’s school supplies or investing in their small business.

Now there is more pressure on cash transfer programs to enhance their effectiveness. So how can we further help families make the best use of money?

Research from the emerging field of behavioral science—the study of how humans make decisions and take actions—suggests that light-touch design features may improve outcomes at little additional cost. The application of behavioral insights has already revolutionized the design of products, policies and programs with a diverse array of development goals. We can use these same insights to design cash transfer programs to set beneficiaries up for success.

Beyond giving people money, social assistance programs must help them be intentional with it. Behavioral science tells us that, regardless of income level, most people don’t think about how to spend an infusion of cash – be it a paycheck, cash transfer or anything else – right before receiving it. And as we know from studying behavior, in the case of cash transfers, that makes it less likely for the money to be funneled toward what people most want to use it for in the longer term, such as saving up to start a business. Fortunately, creating an easy avenue for cash transfer beneficiaries to set goals and make plans for achieving them can go a long way toward helping them make the most of their money.

A cash transfer beneficiary in Madagascar receives a payment after selecting a savings goal. Photo by Abi Warren, ideas42

Today, a new generation of cash transfer programs – currently being piloted in several countries in Africa – uses behavioral insights to help beneficiaries decide how to spend their cash and follow through on those plans. But the circumstances under which they receive the funds—like how long they have to wait on payment day or how close the local market is to the payment site—impact whether they put that intention into action. Other often-overlooked program design factors, such as the frequency of payments or how the purpose of the cash is framed, can disproportionately affect how people spend (or save) their money. Insights from behavioral science show that people act in predictable ways—and we can use that knowledge to design cash transfer programs that support people’s goals and continue to set them up for success.

For example, in our work, we have found that the way payments are made often caters more to administrators’ convenience than beneficiaries’ needs. But some innovators are already changing the timing, location and frequency of payments to suit recipients. For instance, GiveDirectly, a nonprofit that provides unconditional cash transfers, is experimenting with allowing beneficiaries in Kenya to choose when they’d prefer their payments to occur. This is important because getting money at the wrong time can actually increase stress. When cash arrives infrequently, it forces recipients to stretch funds until the next payment. But if it is transferred too often, recipients must save slowly over time, pulling their attention away from other critical tasks. While it isn’t always possible to pay everyone according to their ideal schedule, even offering some payment flexibility may help recipients achieve their goals more quickly.

A simple prompt for beneficiaries to consider how they’d like to use their money right before receiving it can also support their financial goals. Other tactics include reminders to follow through on plans, systems to provide feedback to people on their savings progress, and wallets to help them physically separate (and thus mentally separate) what they want to spend routinely from what they want to set aside for the future. Many inexpensive options exist that are fairly easy to put in place.

To bring more of these solutions to cash transfer programs, ideas42 and the World Bank, with financial support from the Global Innovation Fund, are launching a new initiative, Behavioral Design for Cash Transfer Programs. Working with government partners to identify the best options for incorporating behavioral designs in cash transfer programs across several African nations is a critical next step in improving this anti-poverty tool. We can then work to make behavioral science an automatic part of any social protection program that features a cash transfer.

Improving the efficiency of cash transfers can cut costs while maintaining and enhancing the collective agency of recipients. The next step in the evolution of cash transfer programs is to follow advances in other fields by providing low-cost, high-impact and effective support, based on behavioral research. We envision a social protection sector where all cash-based programming is designed to incorporate the latest findings from behavioral science research. With cash, families may imagine a better future; we should do all we can to help them take control of it.

The post How Incorporating Behavioral Science into Cash Transfer Programs Is Changing Lives appeared first on ideas42.

Digital tools such as automated savings and investment, expense tracking, and person-to-person payments save people time and help them manage complex finances. Useful features like these can even support overall financial health, particularly for low- and middle-income consumers, if traditional financial services don’t meet their needs. Widespread adoption of these services also benefits financial providers that have invested in the technology. It can reduce retail costs, enabling them to offer products to customers at lower prices, and produce data that informs new features.

Yet many people don’t use digital financial services, and not necessarily because they have made an active decision not to. As we have written about before, boosting the adoption of digital services that help people build savings, reduce debt, and manage cash flows could support greater financial health for the 138 million Americans who are struggling financially.

That’s why, with the generous support of JPMorgan Chase & Co., we created an open-source playbook for financial providers to easily apply behavioral design to digital financial services. The playbook builds on our years of experience applying behavioral science to financial health—from supporting employee financial stability to designing the Financial Health Check to reimagining financial inclusion. As more and more financial services and tools move into the digital world, it is prudent to package lessons and strategies for helping customers find and use digital financial products in a digestible format, so providers like banks and credit unions can employ them.

How does behavioral science fit into digital financial services? We know that when it comes to managing financial tasks, consumers aren’t constantly scanning the marketplace for new solutions to make banking easier, comparing costs and benefits, or avidly using their “ideal” products once they’ve found them. It’s more likely that household financial management consists of taking care of immediate, short-term tasks such as paying a bill that has come due. And people tend to stick to their established habits because it’s what they know. Even if a someone wants to try new digital financial services, a series of subtle obstacles can still stand in the way.

The playbook shows providers how to address four common behavioral barriers to adopting digital tools:

Capturing attention

We all have limited attention. Digital financial services may never even enter our line of sight, or may quickly be forgotten. The playbook outlines several principles for overcoming this challenge, including details on how to incorporate the human element in a digital environment.

Inspiring trust and confidence

People may lack confidence in a completely virtual financial transaction with no tangible paper trail, and new providers, lacking a known brand name, may struggle to build trust without that human interaction. One path to inspiring trust is to ensure the images, aesthetic style, and wording of a product reflect the way users see themselves (or want to see themselves).

Simplifying the decision

The seemingly endless set of product options (from budgeting tools to person-to-person payment apps to automated savings and investment products) can be overwhelming to navigate for a consumer with little or no support. Limiting the number of options and/or using the same attributes to describe all options can help people evaluate trade-offs.

Facilitating action

The hassle of setting up financial profiles, managing usernames and passwords, and linking external accounts can derail onboarding and cause many people to give up. Internet connectivity issues and limits on data usage or device storage can make it even harder to follow through. Of course, eliminating complex steps outright is ideal, but when this isn’t possible, helping users create detailed plans for navigating obstacles can promote follow-through.

Putting these insights into the hands of financial providers expands the reach of behavioral science for financial well-being. Banks, fintech startups, nonprofits, and credit unions can use this playbook to incorporate a behavioral perspective into their digital services, increasing adoption and use. And when financial providers help customers overcome common barriers to managing finances digitally, it can clear a path toward helping them reduce debt, grow savings, and improve their financial health.

The post Introducing a Behavioral Playbook for Financial Providers appeared first on ideas42.

“It’s very hard for me to save, because I have so many day-to-day expenses for my small kiosk. Still, at the beginning of the month I manually transfer part of my commission to my savings account, that way I don’t use it for other purposes during the month. It would be great if this transfer would be made automatically, every month.”

– Andrés, 45-year-old shop owner in Santiago Centro, Chile

We spoke with Andrés as part of our work to improve savings in Chile, and what he expressed was a very common feeling among the dozens of people we interviewed. Most informal sector workers want to save for their futures, but even those with access to banking products find it challenging—this is true around the world. One reason saving is hard is that most financial tools are not designed for the ways people act and make decisions in real life—made clear by Andrés’s desire for the ability to automatically save some of the monthly commission he receives.

That’s why, with support from the MetLife Foundation and as part of our ongoing collaboration with CajaVecina, a correspondent bank for the Chilean public bank BancoEstado, we’re developing a new tool to make saving easier, starting with CajaVecina’s own operators. There are 22,700 people who provide banking services for CajaVecina in small shops across communities throughout the country. They are also some of the bank’s most frequent customers.

Our behavioral diagnosis revealed that, like other CajaVecina users, operators have a general intention to save but often fail to do so. One reason for this is that they don’t have heuristics, or simple rules of thumb, for when, how, and how much to save. Additionally, when money is labeled for “savings,” people are less likely to dip into it, even if there are no restrictions on access. While this is a useful feature of savings accounts, it can, paradoxically, make it harder to set aside the money initially. CajaVecina operators may hesitate to allocate money to savings because of that separation.

We created a rule of thumb for operators: save a portion of your monthly commission from CajaVecina. We prompted them to choose a fixed amount that varied between $35 and $80 depending on their average commission, and this suggested amount represented 25% of their commission. Also, we made the transfer automatic so they don’t have to make the decision to save each month or risk forgetting the ongoing manual deposits. This is all part of a program they only have to enroll in once to set up the recurring transfer. By taking a single action operators can save every month.

We chose this approach because research shows that automatic recurring transfers are remarkably effective at increasing savings for retirement or for other uses. Most literature is based in “opt-out” mechanisms, through which consumers are automatically enrolled in a product or service beneficial for them unless they actively choose to opt out.

But opt-out approaches aren’t always feasible, as they were not with CajaVecina. In this case, an effective solution was to offer an “opt-in” mechanism. Of course, for the program to be effective, we need to inspire operators to sign up. Here too behavioral insights can help. We’re embedding behavioral insights into the enrollment process and into the communications about the program. For example, we are:

• Advertising the program to operators through the Point of Service (POS) machines they use to make transactions and view their transaction history and commissions, which helps reinforce the connection between CajaVecina and saving.
• Prompting operators to think about their long-term goals and how saving money now can help them become a reality.
• Enrolling operators through a simple process over the phone, eliminating as many hassles as possible and creating a clear moment for immediate action.

We know that Andrés will be glad to have automatic transfers of his commission at his disposal. To see how others engage with the program, we conducted two pilot tests with small groups of operators in the Santiago metro area, with promising early results. To determine the impact on savings for all CajaVecina operators, we are currently conducting a randomized evaluation of the program across Chile. Stay tuned for the results of this evaluation, which will help determine the impact of interventions like these and produce findings that support the financial health of thousands of CajaVecina operators throughout Chile.

The post Making Saving Easier appeared first on ideas42.

For the last two years, Dorothee, who works in a rice field and makes handicrafts in Madagascar, has been the main provider for her family. Her husband used to be a fisherman until an injury prevented him from getting into the water. They have one son and four daughters, and her income isn’t enough to cover school fees for all her children.

The Government of Madagascar started the Human Development Cash Transfer program in 2016 to help families with children up to 12 years old cover necessities like school fees and healthy food. The program provides cash to more than 100,000 female heads of household like Dorothee on the condition that their children enroll in and attend primary school. Cash transfer programs like the one in Madagascar have been proven to reduce intergenerational poverty by helping children get more years of education, supporting their health and nutrition, and promoting productive family activities. Before receiving these cash transfers, Dorothee only had enough money to send her son to school—now, two of her daughters attend as well.

The cash relieves some financial strain from Dorothee’s family and thousands of others. However, as with anyone managing money, it is difficult to plan how to use it in the short and long term—not because she doesn’t know what’s best for her family, but because living in poverty can hinder a person’s ability to take the very actions needed to plan effectively, such as assessing risks and avoiding tempting purchases. Additionally, many people earn their living through farming, meaning there are times each year when they’re not producing crops and have reduced cash flows, and planning for those times can be difficult. The inclusion of more supportive planning tools could give cash transfers the potential to help improve families’ livelihoods and futures even more than they already do.

We know from behavioral science that like any other product or policy design, effective planning tools must take into account the way that people actually act and interact in the real world. That’s why, with support from the World Bank, we interviewed cash transfer beneficiaries to learn about how they make decisions about using their cash, and what kinds of tools would help them achieve their goals. Based on these insights, we designed a behavioral intervention that is delivered every two months right before the female heads of the household collect their money. In the design, groups of women collecting their transfers go through an exercise in which they set goals for what they hope to do with their cash and share their goals (and progress) with each other. This serves the dual purposes of both strengthening their accomplishments and community bonds. In one of the exercises, women are given a set of four cards with pictures of major purchases they could make with the transfer (related to education, nutritious food, savings, or hygiene). They are then asked to choose a “primary” identity (for instance, being a mother) and how it is influencing the way they make decisions. After this they rank the cards based on which expenses they feel are most important to them based on their chosen identity. Finally, there is a group discussion about the identity exercise.

We will share the broader results of our goal-setting intervention this fall, but we’re already hearing promising anecdotes about positive changes from participants. With a recent cash transfer, Dorothee bought a pig that she will raise and sell later in the year to improve cash flow at a time when funds would normally be tight. She told our team that the sessions have already helped her prioritize household expenses in this way, based on what she feels is important for her and her family.

“As a mother, it is my responsibility to make sure that my children are happy,” Dorothee said. She herself received only three years of education as a child because her parents couldn’t afford to continue her schooling, but she has high hopes for her own kids. “My dream is…that they get their bachelor’s degree,” she said. Making cash transfers as effective as possible for the people receiving them using features built from behavioral science doesn’t only alleviate strain on families today, it also can help parents create new opportunities for their children’s future, a critical step toward ending intergenerational poverty.

The post Cash Plus Goals Help Families Invest in Their Children’s Futures appeared first on ideas42.

Saving money, even in small amounts, has countless benefits. It helps low-income households build financial resilience—the ability to manage unforeseen expenses and avoid crises. However, saving is challenging for everyone—even when we intend to save more, human tendencies such as present bias, depletions in self-control, and limited attention tend to get in the way of our good intentions. It’s even harder when we don’t know exactly what we’re saving for, and when we don’t have access to formal savings channels like savings accounts.

It’s common for people whose needs for financial services aren’t met to create their own informal methods of saving money. Most clients of CAME, a large microfinance institution in Mexico, keep money socked away at home or participate in informal community-based savings groups by pooling their savings with family and friends, due to limited access to formal savings products. While these informal savings methods are less secure than keeping money at a bank, they allow easy access to funds in case of sudden financial emergencies. But they’re still subject to the same behavioral barriers to saving successfully. That’s why CAME decided to broaden its efforts to reach more clients—from offering microloans to launching a new savings product that helps its clients save more without the risk that comes with saving informally.

CAME clients are predominantly female small business owners whose average income hovers close to the poverty line. Knowing that saving money is difficult for all of us, and drawing upon evidence that living in poverty can exacerbate present bias and limit psychological resources such as self-control and attention, we partnered with CAME—thanks to generous support from MetLife Foundation—to develop a behavioral intervention with the aim of fostering savings among their clients.

A good, evidence-based behavioral solution for bridging a savings intention-action gap is making savings automatic, but what can be done when that’s not an option? Building on insights from previous studies, we designed a goal-setting exercise to be facilitated by CAME staff dedicated to working directly with clients. These savings promotores are responsible for increasing clients’ awareness of their potential future needs and suggesting the appropriate savings products to help manage their financial lives. In our intervention, clients choose both a goal to save toward, and an amount they will put toward making it happen. After opening a savings account, clients then receive a savings card with an image reminding them of their goal and the voluntary deposit amount they chose to commit to. Next to the deposit amount, there is a space for their signature, in order to create a sense of commitment. Additionally, clients can earn small prizes for accumulating deposits, and they will receive follow-up text messages to keep their goals top of mind over time.

We chose goal-setting for our intervention because it has proven an effective solution for building financial resilience in several different contexts. All of the aspects of our design draw from existing evidence: results from prior ideas42 work in the Philippines show that going through an exercise of stating concrete savings aspirations can help people save more by driving their attention and effort toward achieving their goals rather than nebulous savings. Research across different countries also demonstrates that reminders can help people avoid procrastination and follow through on their savings goals over time. Finally, rigorous evidence also suggests that creating a sense of commitment within individuals to achieve their savings goals imposes an emotional price of not pursuing them, which encourages people to choose to save.

Even with such an intervention in place, the reality of saving is still quite difficult. However, early results from our pilot with CAME clients are showing positive impact. It is clear from talking to clients that our intervention has kept their savings goals top of mind. One CAME client, with a look of hopefulness on her face, told our team that she started saving in April in order to be able to provide a Christmas Eve dinner for her children and grandchildren this year. Another client mentioned that he is saving to buy new tools for his carpentry business. While he applied for a loan to invest in his business, he sees his CAME savings account as a good alternative that will enable him to rely less on credit. Moreover, clients shared that they enjoy receiving the personalized reminder text messages. In addition to reminding them of their goals, they report that the messages make them feel special and build on their sense of trust in CAME.

Another interesting insight from our conversations with clients is how much they have come to actually value the restriction the savings accounts impose on their financial habits. Once it is deposited, the CAME accounts don’t allow clients to withdraw money for a fixed period of time, which helps them to avoid the temptation of making purchases in the moment or covering day-to-day expenses.

We’re encouraged by the initial positive feedback we’ve been collecting from CAME clients in this pilot test of our goal-setting intervention. Over the next weeks, we’ll be analyzing how the intervention affects savings behavior. Stay tuned for results that will inform the impact behavioral interventions can have in boosting savings among micro-loan holders and help households manage their complex financial lives and increase their financial resilience and security.

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The start of a new academic year should be an exciting time for the 19.9 million students who recently began or are continuing in college. But for many students, college also brings stressful financial decisions. These decisions weigh on many students, but the burden is often heaviest for those who are balancing school with full time jobs, care-taking responsibilities, and other individual circumstances in their lives. We know the college experience is rife with hidden behavioral barriers that get in the way of students’ financial stability—and crucially, their path to graduation. Between rising tuition and fees, extremely expensive textbooks, and the costs of transportation, housing, and food, managing the costs as a college student in the United States is undeniably challenging. In fact, it’s a major reason many students don’t complete their degree, which puts students in the double bind of having to bear the price of postsecondary education without reaping the benefits. While support is available in the form of financial aid, scholarships, and loans, navigating the systems for accessing these options presents its own set of challenges, and managing the funds they make available is seldom straightforward.

Fortunately, there are opportunities to ease this burden for students. With the generous support of MetLife Foundation, we’ve identified five high-potential opportunities, rooted in insights from behavioral science, to support students’ financial health on the journey to, through, and after college. Some of these areas already have a robust evidence base and are ripe for expansion and scaling of impactful solutions. Others represent opportunities to investigate new solutions to the challenges of student financial health.

One such opportunity is to expand and scale interventions to increase FAFSA filing among students. Perhaps unsurprisingly, submission of the Free Application for Federal Student Aid (FAFSA), which can unlock thousands of dollars in financial support, can be linked to persistence through college, especially among low-income students. What may be surprising is that every year students forgo billions of dollars in grant funds (which don’t have to be paid back) because they either submit their applications late, or don’t apply for aid at all. Although filling out a form may seem straightforward on its face, with more than 100 fields to fill out – some of which are complex, intimidating, and require a time commitment to find the information – the FAFSA can be a daunting challenge.

Light-touch solutions grounded in behavioral science have been shown to consistently and significantly boost FAFSA filing rates at minimal cost, but even these successful solutions are not always scaled widely. Moreover, FAFSA programs often target incoming students only, leaving returning students without needed support throughout the re-submission process. As we’ve learned in our own work with students at City University of New York (CUNY), this is a huge opportunity for impact, as many students don’t renew their FAFSA in large part because they incorrectly associate the submission process with starting college, and don’t realize they need to file it each year they’re in school.

Knowing this, our recent work with the CUNY aimed to expand proven FAFSA support programs to continuing students. The intervention consisted of a series of emails and text messages encouraging students to make a plan to complete the FAFSA at a certain time and location, correcting misperceptions about eligibility and the consequences of not filing, making support services more salient, and providing regular and well-timed reminders of critical steps. When tested with three CUNY campuses, FAFSA renewal rates increased by 31%. In addition to being effective, the intervention package is highly cost-effective: each dollar spent on the communications to students generated almost $250 in additional student aid.

It is critical for college administrators and other practitioners to scale these proven interventions to ensure that all students have access to the support they need to complete the FAFSA and receive all of the aid for which they are eligible. It could be the difference between persistence and dropping out for many students. 

Another high-potential opportunity we’ve identified is testing new approaches to optimizing the selection of loan repayment plans for students leaving college. Student loan delinquency and default is a growing challenge for those who have left college (whether they earned a degree or not). In fact, 11.5% of people who began student loan repayment in 2013-14 were already in default three years later. In many cases, default may be avoidable through enrollment in income-driven repayment plans, which scale payments to borrowers’ ability to pay. However, up to 80% of people eligible for these plans don’t sign up.

Some promising interventions have been tested in this space, but more experimentation is needed to enhance the process through which students choose a loan repayment plan. For example, exit counseling could, in theory, be an effective channel for reaching students with actionable, just-in-time advice about the loan repayment plan that’s right for them. Unfortunately, as of now, the channel is not optimized, lacks personalization, and overloads students with information.

Both researchers and practitioners can contribute to the existing knowledge base by exploring new approaches to guide students through loan repayment, and by measuring effects of those approaches on student financial health.

These and other opportunities are detailed in our new brief: Insights and Opportunities: College Student Financial Health and Behavioral Science. We hope that it serves as a starting point for practitioners, funders, and other stakeholders to take fuller advantage of the power of behavioral science to improve student financial health and, ultimately, college completion and a better path toward success in their post-college lives.

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BDC participant workshopping a communications piece

We’ve spent more than a decade applying behavioral science to complex social problems, all in the service of improving the lives of millions of people. Part of our mission is to dramatically expand the use of behavioral science as a problem-solving tool, and that’s why we’ve recently broadened our efforts to bring this approach to more problem solvers.

Earlier this year, we launched the NYC Behavioral Design Center (BDC) to bring behavioral solutions to the myriad NYC non-profit organizations working to advance the well-being of countless residents in the nation’s largest city. Applying a behavioral lens to many of the common problems these organizations face—such as low enrollment in programs or drop-off in client participation—can help more New Yorkers access and benefit from valuable programs and services.

The BDC is our first centralized capacity-building resource for leaders and staff of local non-profit agencies. So what specifically does the NYC Behavioral Design Center do, and how can service providers and civic activists leverage it?

First, we hold free workshops approximately once a month. Topics range from unpacking how living in poverty affects decision-making to applying a behavioral lens to program communications. Participants in our 2018 workshops are now leveraging behavioral insights to improve email and print communications, rethink how information is portrayed on their website, and streamline the processes for enrolling in programs. These strategies can improve persistence as well as engagement, which in turn makes it more likely that more people will benefit from these programs and make progress toward their goals.

BDC workshop covers the heat map: where do people’s eyes land in online communications?

BDC workshops have a strong focus on applying behavioral science insights and research findings to the practical challenges participants encounter in their day-to-day work. For example, this fall, we held a session on Behavioral Design and Civic Engagement for members of United Neighborhood Houses (UNH), the membership organization of 40 New York City settlement houses and community centers that provide vital services to more than 750,000 New Yorkers each year. Several participating organizations then applied what they learned to their Get Out the Vote communications before the midterm elections in November. One UNH member organization, the Educational Alliance, used tips on leveraging social norms to create a Why We Vote campaign, wherein they made and shared a montage of photos of staff and community members with signs stating why they voted. Recognizing that civic engagement is an everyday and every year endeavor, and not just about Election Day, UNH and its members plan to continue applying behavioral science strategies as they encourage people to participate in civic life and advocacy, Participatory Budgeting, the 2020 Census and more.

The BDC also works directly with organizations to design solutions to problems they encounter in their ongoing programs. We recently selected the first group of five non-profit partners with whom we will work to identify behavioral barriers within their programs and design solutions that facilitate productive use of services, by increasing participant engagement, persistence, and follow-through.

For example, in our first cohort, we’re working with Room to Grow to develop effective referral strategies for the new Bronx location of their program that provides low-income families of infants with coaching, service referrals, and essential baby goods from prenatal stage through age three.

Additionally, we’re partnering with Queens Community House to develop behaviorally informed strategies for encouraging older high school students at risk of not graduating to obtain services and support aimed at increasing school attendance and facilitating a smooth transition to post-secondary education and employment.

Finally, the BDC offers free weekly office hours to NYC non-profits interested in one-on-one, applied behavioral science consulting and advice. This is a great option for people with quick questions, such as seeking advice on a communication piece or input on whether a behavioral intervention is appropriate for a particular problem.

By offering support through multiple channels including in-depth workshops, customized project assistance, and quick-touch office hour consultations, we aim to reduce the barriers (and hassles) to tapping the power of behavioral science to improve individual lives and strengthen communities. Stay tuned to hear about upcoming workshops and results from our first project partnerships.

Are you a New York area non-profit interested in utilizing the Behavioral Design Center? Sign up for our listserv or an office hour, or email us at laura@ideas42.org to learn more.

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Early reading habits are predictive of a number of later life outcomes, including higher education attainment and income, yet more than two-thirds of fourth graders in U.S. public schools are not reading proficiently.

We often think of education as taking place entirely at school, but fourth graders only spend about 13% of their waking hours in the classroom, meaning the simple act of regular at-home reading can have lasting effects on children’s lives. In addition, parents reading together with their children not only fosters positive attitudes toward reading, but also improves the development of comprehension and vocabulary.

But families reading together for even 20 minutes a day isn’t as simple an ask as it sounds. At its heart, at-home reading is not only about literacy—it’s also about habit formation, and anyone who has ever tried to develop a positive habit knows it’s not easy.

That’s why we worked over the past year to identify behavioral barriers to reading at home and to design solutions that set parents up for success and enable their children to improve their reading skills. Working with Stand for Children, a non-profit education advocacy organization, we developed and piloted Every Child Reads, a behaviorally informed program designed to support family reading.

Behavioral barriers to building a reading habit

Trying to read more often at home is difficult, and full of often-overlooked behavioral barriers—we identified 16 separate barriers in our work. Here are just a few of the insights we uncovered:

It’s hard to find time to sit down and read. With busy schedules, it can be difficult for parents to find the minutes in a day to read with their child. With many pressing demands, families experience time scarcity, where they focus on what is most urgent even when there may be other important but less time-sensitive tasks.

There are no immediate consequences for not reading. Failing to take the time to pay bills has obvious (and immediate) negative consequences for parents. But there are few immediate repercussions for not reading on a given day, and it can be hard to see the connection between 20 minutes of reading right now and the long-term impact on a child’s life.

Reading isn’t the default activity for many families. Small details—like which book to read, where to do it, and how much time to dedicate—take up mental energy and can deter families from getting started. When reading becomes a default activity—part of a family’s regular routine—the answers to these questions become so automatic that people might not even need to ask the questions. But when reading isn’t the default, people tend to stick to their routines.

How can a reading program help families overcome these barriers?

We developed eight design principles that program designers can use to help families overcome the common barriers to reading at home. Here are just a few:

Encourage parents to make plans, and then send them just-in-time reminders to follow through. Asking parents, “What’s one day you can make sure your child reads this week?” and sending them a reminder on the day they choose is a manageable way to start a reading habit. It may be helpful to suggest pairing reading with another activity, such as when their child gets home from school or is waiting to pick up a sibling.

Help parents set goals. Encourage parents to choose challenging, but not impossible, goals, and guide them toward goals that are effort-based (such as reading three times a week) rather than performance-based (such as finish one book each week). Giving parents opportunities to reset periodically can reduce any negative feelings about missing goals, leveraging the fresh start effect.

Normalize at-home reading. Reading at home is a private act, and as such it’s difficult to gauge who is reading and who isn’t. Emphasize that other families are making progress on their reading goals in order to set a social norm. Highlighting the successes of a diverse group of families and encouraging families with the strongest reading habits to talk publicly about their achievements and the challenges they’ve faced can also help to strengthen norms about reading.

The challenge of measuring a home program’s impact

With Every Child Reads, our goal was to create an effective, scalable program that would help families face some of the biggest barriers to at-home reading. However, we soon encountered tradeoffs in our work: the most helpful program isn’t always the most scalable, and some of the steps we would need to take to measure whether the program works could derail its effectiveness.

For example, recording reading activity is needed to show if the program had an impact, but automatic data logging would require families to read exclusively on an app—essentially instructing them not to read paper books, which could deter many people. Book logs filled out manually would let us record non-app reading, but that adds an extra hassle to the process, and we know even minor hassles can cause people to disengage.

We prioritized making the program as behaviorally informed as possible, which means we don’t have a clear indication—other than positive feedback from parents—of how successful our pilots were at increasing the amount of time families spend reading outside of school. But the insights gleaned from applying a behavioral lens to the problem of low literacy levels, and specifically a lack of home reading, may support and strengthen other programs with similar aims.

Potential for future impact

Every Child Reads represents a start to applying behavioral science principles to literacy programs, which has the potential to help more families read together, setting children up for greater success at school. These early efforts produced many insights that leaders of home reading programs, schools, and communities could leverage to help more families read together at home, helping to pave the way to better literacy rates and educational outcomes for more students.

The insights above are just a few of the many we uncovered in the process of developing Every Child Reads. Read the project brief and our full paper, Building Home Reading Habits for more, including tips for ensuring book access, a key part of any reading program.

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In 2015, the Supplemental Nutrition Assistance Program (SNAP) prevented 8.4 million people from living in poverty. This essential and effective safety net program helps people with low incomes purchase food for themselves and their families—an estimated 40.8 million Americans were living in poverty in 2015; absent SNAP benefits, that number would have been 49.1 million. Despite its success, SNAP is facing rule changes that would cause people to lose benefits—harming those who need it most and weakening the poverty-fighting power of the program. Sadly, even though these rule changes cause unnecessary harm, they are being sold to the public as an effort to make SNAP more effective.

The latest proposed rule announced in early February would impose stricter work requirements on people who use SNAP. Currently, to access food benefits for more than three months, SNAP recipients must report that they meet certain work requirements. Sensibly, states may request a waiver of this time limit in areas of high unemployment. The new proposed rule would change how those requests from states are handled. This would, according to the Food and Nutrition Service, “encourage broader application of the statutory ABAWD [able-bodied adult without dependents] work requirement, consistent with the [current] Administration’s focus on fostering self-sufficiency.”

In plain English: under this new rule, work requirements would become stricter, and fewer people who really need help would get healthy food.

That’s because work requirements force people to repeatedly prove their employment status in order to maintain their benefits. The stricter requirements become, the less room there is for error, but all people make errors, like missing deadlines, or forgetting small details. Unfortunately, research about poverty has shown that living in chronic scarcity—scarcity of money, time, and cognitive bandwidth—makes it even easier to make mistakes, because people are busy juggling a constant stream of urgent matters, like paying rent, managing an unpredictable work schedule, and figuring out how to feed their family on a stretched budget. In fact, a new report on child poverty claims that work requirements for welfare programs are “as likely to increase as to decrease poverty.”

Today, we released Work Requirements Don’t Work, a new white paper demonstrating why attaching strict work requirements and a burdensome reporting process to a basic need like food violates three principles for designing programs that serve people with scarce resources: cut the costs, create slack, and reframe and empower.

Cutting the costs of using a program means reducing unnecessary complexity and asking less of people’s time and mental energy. To do this, programs should reduce barriers to entry and cut needless strings that are attached to benefits.

To create slack, programs should account for inevitable human errors or unanticipated events in a person’s life. This means being generous (unconditionally) and putting safeguards in place to prevent the loss of benefits.

Programs that reframe and empower use intentional language and treat families as experts on their own lives—because they are. For people to escape poverty, they first must believe they have the power to effect change in their own lives. That starts with society treating them with trust and dignity.

Stricter work requirements for SNAP fail on every count here: they increase the temporal and cognitive costs of using SNAP, they reduce slack for people already living on the edge, and they send a terrible message to people who use SNAP: We don’t trust you. Making it harder for people who just need some help to get a basic need like food will only intensify the effects of chronic scarcity, and will do nothing to help people escape poverty.

So-called “reforms” that make basic essentials harder to get will harm the people with the most need. If we really want SNAP to remove even more people from poverty each year, policy-makers should be focused on making it easier (not harder) for eligible people to enroll and maintain their benefits—and their dignity.

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