Readying oneself with Ready savings
Blog Post
Feb. 17, 2010
What is AutoSave? Isn’t that the computer back-up system?
There are some similarities between AutoSave and the program that saves your documents when your computer crashes: both are designed to protect what’s important to us, and to provide a little security from unexpected events. AutoSave is a low cost, potentially scale-able model for increasing personal savings.
<div><strong><i>How did the AutoSave project start? </i></strong></div> <div>The AutoSave concept was inspired by the success of the retirement saving-focused projects—showing that automatic enrollment and automatic escalation improved employee take-up in employer-sponsored retirement plans. This got us thinking, could similar behavioral supports be used to fix a three-fold problem: too many people are unprepared for the inevitable emergency or unexpected expense with “ready” savings; few suitable products exist to encourage small savings; and inertia often keeps us from even beginning to save.</div> <div><strong><i>What is the AutoSave pilot? </i></strong></div> <div>The AutoSave pilot is a road test of whether this vision for increasing personal (non-retirement) saving at the workplace was realistic and attractive to financial institutions, employers, and their employees. We teamed with social policy researchers at MDRC to develop and implement a six-month pilot. six employers (a mix of public, private, nonprofit, for-profit, large, and small), and five financial institutions (3 major banks and 2 credit unions) are currently running the pilot across the country.</div> <div>In these pilot sites, employees are encouraged to “AutoSave” by opening a low- or no-fee savings account, and authorizing their employer to directly deposit $15-$25 from their take-home pay into this account.</div> <div> Prior to rolling out the pilot, each site worked intensively to:</div><ol><li>Negotiate the terms of the savings account, such that employees find it rewarding to save in small dollar amounts, and have funds protected from fees and everyday purchase use;</li><li>Streamline the steps involved and simplify the forms used to collect only the most essential applicant information; andCreate a process for AutoSave enrollment to take place <u>entirely at the employer’s workplace</u>, and minimize the administrative burden felt by employers, employees, and financial institutions. </li></ol> <div><b><i> </i></b>While designing the pilot, we learned that employers could not automatically enroll their employees in AutoSave, like they could in employer-sponsored 401(k) retirement plans. Thus we adopted as many behavioral insights as possible, in an attempt to have AutoSave enrollment feel as automatic and easy as possible, without crossing employee or employer comfort lines.</div> <div><strong><i>How does this pilot apply lessons from behavioral economics? </i></strong></div> <div>By making it EASY (to save). In that spirit, <b>click here</b> <object type="application/x-shockwave-flash" data="/files/audio/players/1pixelout.swf" width="290" height="24"> <param name="movie" value="/files/audio/players/1pixelout.swf"> <param name="wmode" value="transparent"> <param name="menu" value="false"> <param name="quality" value="high"> <param name="FlashVars" value="playerId=&bg=0xcccccc&leftbg=0x0d253f&rightbg=0x4c7888&rightbghover=0x6499ad&lefticon=0xefefef&righticon=0xFFFFFF&righticonhover=0xefefef&text=0x000000&slider=0x80B3CC&loader=0xE5EFF5&track=0xFFFFFF&border=0x80B3CC&soundFile=/downloads/alejandra-podcast-021610.mp3"> <embed src="/files/audio/players/1pixelout.swf" flashvars="playerId=&bg=0xcccccc&leftbg=0x0d253f&rightbg=0x4c7888&rightbghover=0x6499ad&lefticon=0xefefef&righticon=0xFFFFFF&righticonhover=0xefefef&text=0x000000&slider=0x80B3CC&loader=0xE5EFF5&track=0xFFFFFF&border=0x80B3CC&soundFile=/downloads/alejandra-podcast-021610.mp3" width="290" height="24"> </object>to see a larger version of the slide, and for the accompanying 90-second narration. </div> <div> <strong><i>What have you found so far?</i></strong></div> <div>In four months “on the ground,” we see a widely shared value that saving is an end in itself. Employers and employees alike acknowledge that becoming more financially secure is an ongoing goal.</div> <div> Focus groups have told us that AutoSave participants who struggled to save because of inertia, procrastination, lack of self-control, or confusion about appropriate products, did not face those barriers with AutoSave. This <i>suggests </i>that simplifying the process and adding enrollment supports has led to take-up.</div> <div> We’ve also noticed that the recommended savings amount ($25/paycheck in most sites) is relatively “sticky,” that is, employees are choosing and staying at this savings level.</div> <div> We have seen take up rates as high as 25%, which is very exciting. But the take-up rate varies in each site and could be related to the employees use of direct deposit, the outreach and marketing performed on behalf of AutoSave, employee and employer characteristics, and employees’ past experiences with banks and banking </div> <div> <strong><i>What’s next for AutoSave? </i></strong></div> <div>We’ll monitor take-up and field experiences from the pilot sites for a few more months.</div> <div>We’ll take a look at the aggregate data on account usage: Did participants remove money regularly from these accounts or leave them untouched? Did participants change the savings level over time? Then, we’ll step back, look at the model, and see what operational, research, and policy questions need further attention before proceeding to “any further piloting or replication.” The next phase of the project may include a larger, experimentally-designed demonstration, or policy recommendations. Ideally, we could set up a test of AutoSave to observe how the presence of “ready savings” impacted an employee’s overall financial stability.</div> <div><i> </i></div><div>To learn more about our thoughts on AutoSave early pilot lessons, please <a href="http://assets.newamerica.net/publications/policy/automating_savings_in_the_workplace">click here</a> to read a January 2010 paper.</div> <div> To read the original AutoSave concept paper by Reid Cramer, please <a href="/downloads/AutoSave.pdf">click here</a>.</div> <div> To learn more about MDRC’s role, please visit their AutoSave page <a href="http://www.mdrc.org/project_16_98.html">here</a>.</div> <div> <i> Caroline Schultz, Jim Riccio, Jim Wallace of MDRC and consultants Scott Zucker, Terri Feeley and George Barany.</i></div> <div> </div><div><i> </i>This initiative is made possible by the generous support of the Rockefeller Foundation and the Charles Stewart Mott Foundation. We also thank the Annie E. Casey Foundation for making available (and indispensible) to AutoSave Mindy Hernandez.</div>