How can we help people follow through on their intentions to make monthly deposits to save for college?
Individual Development Account (IDA) programs are hugely promising. They offer low-income people a savings match (in this case it was 3:1) that allows people to save and pay for postsecondary education. Applicants must save regularly for a minimum of six months. However, many IDA participants struggle to follow through on their savings intentions, meet their savings goals, and collect their matches.
MesaCAN’s standard practice was to discuss with new IDA participants the importance of saving each month but then leave it up to each individual to make their monthly deposits. When people skipped a deposit staff would call to follow-up, but there was no system for reminding people to make deposits before they defaulted.
With MesaCAN staff, we redesigned their IDA sign-up and deposit process. In our redesign, when people signed up for the IDA they were offered a new SMS reminder program. This feature texted participants a few days before their deposits were due. This turned out to be very popular with 72% of people opting into the text reminders.
Second, staff walked participants through a planning excercise designed to help them plan and forecast exactly when and how they would make deposits each month. People who live close to their financial margins often have money only at one time during the month- right around payday. Our planning exercise asked participants to focus on the time of the month they were likely to have the most money and commit to making their monthly deposit a few days later.
The text reminders were scheduled to correspond to each individuals pre-planned deposit day.
We compared IDA savers before our redesign and SMS treatment to IDA savers after our redesign and SMS treatment and found that those who went through the saving planning process and received SMS reminders saved more than seven times as much.
Note that this was not a randomized experiment.