Getting to the Top of Mind: How Reminders Increase Saving

We develop and test a simple model of limited attention in intertemporal choice. The model posits that individuals fully attend to consumption in all periods but fail to attend to some future lumpy expenditure opportunities. This asymmetry generates some predictions that overlap with models of present-bias. Our model also generates the unique predictions that reminders may increase saving, and that reminders will be more effective when they increase the salience of a specific expenditure. We find support for these predictions in three field experiments that randomly assign reminders to new savings account holders.

Karlan, McConnell, Mullainathan and Zinman (2011)Peri-urban: Western Mindanao (Philippines); Unspecified locations: Bolivia and Peru.RCT.Sending monthly reminders by text message or by letter to remind individuals who had opened savings accounts and established savings goals.Overall, savings were 6% higher in banks sending monthly reminders. of savings banks.