Insights From the First Science of Savings Challenge

Our first Challenge focused on creating new approaches to budgeting for people with low incomes whose paychecks vary from month to month. SaverLife is currently in the process of testing new approaches on our consumer platform to determine which budgeting tools are most effective for our members. We look forward to sharing our findings in the coming weeks and months.

Budgeting is hard—especially for users with low and volatile income

New Strategies Are Needed

Diverse paper and digital tools exist to facilitate budgeting—but they are often awkward and time-consuming to use effectively with variable incomes. The Challenge submissions offered ideas on how new tools might address the unique needs of users with lower incomes and higher income variability.

Reducing User Effort

Volatile finances require unusually high amounts of time and attention to manage. Submissions aimed to reduce user time and effort in three ways:

• Automation

  If users link their financial accounts, apps can save time and effort by downloading and categorizing transactions automatically.

• Recommendations and Behavior Nudges

  Apps can make it easier to turn budgets into daily action by giving personalized reminders and suggestions.

• Walkthroughs

  Apps can make finances comprehensible by asking users questions to reflect on their income, expenses, financial lives, and goals.

Savings Strategies

The submissions also promoted different strategies for saving money, each of which is particularly important for people with low and volatile incomes.

• Two Short-Term Savings Buckets

  One way to help these users is to recommend creating two savings buckets, one for emergencies and one to provide financial smoothing during months with low paychecks. 

• “Pay Myself a Salary”

  Alternatively, apps can encourage users to put all paychecks into savings as soon as they come in, then schedule a regular day to pay themselves a predictable salary out of their savings.

• Decrease Spending Frequency

  One non-traditional idea to help reduce costs: apps can help users track how often they make purchases—and encourage them to batch their purchases and spend less frequently.

Planning Strategies

Finally, the submissions encouraged different planning methods to support people with low and volatile incomes.

• Tools for Planning Expenses

  Apps can help plan for predictable expenses, remind users of bill due dates, encourage planning intentional shopping trips, and help users look to the long-term.

• Prioritizing Purchases

  Apps can help users sort budget categories by priority level—like “need”, “basic comfort”, or “extravagance”—so it’s easier to make tradeoffs when money is tight.

• Flexible Planning Periods

  Planning biweekly or seasonally sometimes makes more sense than monthly. Tools can let users customize their budgeting period to fit their circumstances.

Conclusion

There is opportunity for a new kind of budgeting tool to support people with tight, unpredictable finances by helping to reduce effort, save strategically, and plan for variable paychecks. This audience has unique needs, and they can be met with innovative new approaches.

We at SaverLife are excited to test ideas from this first Science of Savings Challenge and share the solutions and tools that prove to be effective at helping people build savings and financial health.