"Under-Savers Anonymous": Using Peer Pressure to Save More Money

A new working paper by Felipe Kast, Stephan Meier, Dina Pomeranz combines two of our favorite topics, both explored in recent podcasts: our inability to save money and the efficacy of commitment devices. The paper is called “Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device” (abstract; PDF), and it reports a remarkable near-doubling of savings among those who submit to peer pressure:

We test the effectiveness of self-help peer groups as a commitment device for precautionary savings, through two randomized field experiments among 2,687 microentrepreneurs in Chile.  The first experiment finds that self-help peer groups are a powerful tool to increase savings (the number of deposits grows 3.5-fold and the average savings balance almost doubles).  Conversely, a substantially higher interest rate has no effect on most participants.

And, even more encouraging:

A second experiment tests an alternative delivery mechanism and shows that effects of a similar size can be achieved by holding people accountable through feedback text messages, without any meetings or peer pressure.

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I think it would be interesting to know what the purpose of the savings is here. Is this an emergency fund, to cover unexpected ups and downs in revenue and expenses? Is this to buy something in the short term, like next year's school fees? Something to fund old age? Or just savings for the joy of having them?


I have a couple of observations from this abstract:

It seems that the subject group is one of “micro-entrepreneurs”. I am guessing that the motivations characterizing this group are likely different from that of your everyday Joe. Therefore the findings may not extrapolate readily across society.

If this finding is generally applicable, the reverse also seems to be generally applicable with regard to consumption in the present as given by the old adage, “Keeping up with the Jones’s.”

What a trick it would be to get people to more readily apply peer pressure in the direction of saving for the future over the direction of consumption in the present. Of course Madison Avenue is always lending a helping hand in the pushing along of ravenous consumption today.


"our inability to save money"? I do wish you'd try to write more precisely. Who exactly are you including in "our" here? Certainly not me, and judging from comments on any of the frugality/early retirement blogs, I'm hardly unique, or even an extreme case. So it seems that, rather than making the false assumption that no one can (or is willing to) save and trying to modify that behavior, a better approach would be to start by trying to determine the difference between uncoerced savers and spenders. (Despite, as a previous comment notes, considerable peer pressure to spend.)


Did you ever consider that maybe the people commenting in frugality/early retirement blogs were not representative of the population either?

"A majority, or 64%, of Americans don't have enough cash on hand to handle a $1,000 emergency expense, according to a survey by the National Foundation for Credit Counseling, or NFCC, released on Wednesday."



Wonder if the SMS accountability mechanism works on governments and legislators. For example can a deluge of SMS demanding fiscal prudence induce behavior change in governments and legislators?

Is behavioral response dependent on source of the SMS? For example are legislators more responsive to SMS from constituents or are the more conditioned by SMS from lobbyists, PACs, influential donors?

Can companies use SMS to induce consumers to commit to their products at lower advertising costs?

Eric M. Jones.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery, but I'd save my money. Consider--

Buy a hen. Sell the eggs. Buy another hen, etc.

I am totally convinced that saving just removes the need to actually do something with your money in a timely manner. The money you save will be deflated or stolen by more powerful people than you. Yes, I lost 50% of my 401k. Then my bank sent my savings account to a terrorist in the UK via Western Union and I can't retrieve any of it.

Yes, I'm bitter. Savings is for suckers.


Stephen this is a very interesting article, P2P saving is a great way to overcome self-control problems, and it's a great commitment device. There is a site that helps you creating a saving circle and saving together with friends or family members. http://www.collaborativefinance.org/community/saving-circles