Backer: Increasing savings for college
With student debt burdens reaching record highs, families often have to take on large amounts of debt to pursue higher education. We wanted to investigate if changing savings defaults could increase the amount families save for their children. To that end, we partnered with CollegeBacker, an online college savings platform that allows individuals to set up college savings accounts for their children and then invite other “backers” to donate to those savings accounts.
Since the launch of their online platform, Backer has expressed an interest in improving the size and rate of recurring contributions among their savers. Given the priorities of Backer, we decided to start with an experiment that changes the user interface of the contributors’ online portal. For the initial experiment, we changed the default contribution selection from a one-time contribution to a recurring contribution.
SPI is currently developing additional experiments with Backer, which may include anchoring contribution amounts and providing asset growth charts that allow individuals to compare the returns of different contribution options.
Rainy day savings
Emergency savings is low in the United States; prior to the COVID-19 pandemic, over a third of U.S. households could not fully pay a $400 emergency expense using cash or a cash equivalent. These low rates of emergency savings put households at risk in the event of an unexpected income loss or significant expense.
Emergency savings are often held in checking and savings accounts, and financial institutions, therefore, have an instrumental role to play in building these funds. We partnered with a Midwest credit union to develop a new product called a Rainy Day Savings Account. Our aim with this product was to help credit union members build savings automatically and avoid payment delinquencies on their debts, creating financial benefits for both the member and the credit union.