02.18.20
People Don’t Save Enough for Emergencies, but There Are Ways to Fix That
by: Shlomo Benartzi
According to a 2019 study by the Federal Reserve, roughly four in 10 Americans wouldn’t be able to come up with $400 in a financial emergency. Recent research showed that people were four times as likely to start saving when asked if they wanted to save $5 a day versus those asked to save $150 a month. While saving the large monthly amount feels like an unaffordable barrier, the small daily amount feels like an opportunity, even though they are actually equivalent amounts. Many people will begin saving if it both takes our psychological barriers into account and involves minimal effort. This helps explain why automatically enrolling employees into 401(k) plans is so effective, boosting plan participation from about 70 percent to approximately 90 percent.
Read the full article on Wall Street Journal