Goal Setting and Saving in the FinTech Era

Abstract

We study the effects of goal-setting on saving behavior, exploiting the exogenous introduction of goal-setting features for saving in a FinTech app. We establish that setting goals increases individuals' saving rate, and show that the effect is causal using two distinct identification strategies that control for individuals' endogenous decision to adopt goal-setting. Our results vary along several dimensions. Individuals save more for goals with shorter horizon and larger amounts. They also save more when they use another feature of the app that allows them to divide their overall saving into small amounts (5 Euros) throughout the month. The nature of the goal, on the other hand, does not matter. Only one third of the goals are achieved before the deadline, with general goals having higher probability to be achieved than specific ones. Taken together, our findings indicate that goal-setting has a positive effect on saving, but there is considerable scope to increase its effectiveness by helping individuals set well-calibrated goals, possibly using robo-advising tools.