Behavioural economic opportunities to increase household saving

Abstract

Research has found many positive attributes to individual financial saving, from both a macroeconomic and individual perspective. Yet inadequate saving remains a global issue, particularly in emerging markets such as South Africa. Through thirty-one, semi-structured interviews, this qualitative study sought to better understand the financial decision-making and saving behaviour in South Africa. These findings were used to determine whether the success of the United States’ behavioural economic-based ‘Save More Tomorrow’ program would have the same positive effect on the saving rate in South Africa. By developing the research instrument through behavioural economic theory, the study established that the participants’ behaviour corresponded with the irrationalities and biases theorised in behavioural economics. In some cases even to a heightened extent as a result of the participants’ low financial literacy and difficult circumstances. This created and compounded constraints and limitations on the participants, making it exceptionally difficult to adequately save. These insights informed a framework that advocated that the ‘Save More Tomorrow’ programme would positively affect South African individuals’ saving behaviour. Moreover, pre-defined withdrawal terms and peer-based saving were identified as two additional design elements which would further minimise irrationalities and bias whilst leveraging existing local saving behaviour.