Fri, September 30, 2011
Motivation to Save for Retirement: Imagine Yourself Older
The November Journal of Marketing Research focuses on research into the ways that consumers make financial decisions. One of the papers describes a potentially useful tool for encouraging young people to save for retirement.
A group of researchers from several institutions carried out an experiment in which college students were given goggles and headphones and invited to explore a “virtual reality room.” Among the items in the room was a mirror. When half of the students looked into the mirror, they saw a representation of their face as it looks now. The other half were shown a computer-generated simulation of what they might look like at age 65.
After this experience was over, the students were given a short “decoy” survey, after which they were told that because they had to participate for a full hour in order to earn the promised wage, they needed to complete a second survey. In this survey, they were asked to imagine that they had just received a windfall of $1,000. They were to allocate the money across the following options:
buying a gift for someone special
investing in a retirement fund
paying for a fun and extravagant occasion, or
putting the money in a checking account
According to the researchers, reporting in the article “Increasing Saving Behavior Through Age-Progressed Renderings of the Future Self,” there was a definite difference between the actions of the two groups. On average, the students who had seen the image of their 65-year-old self allocated more than twice as much money to retirement as the control group did.
The inference, of course, is that it’s easier to appreciate the importance of saving for retirement if you can think about yourself as a future retired person. In a sense, the result is obvious – people who plan for the future are more likely to prepare for retirement – but the quantitative difference between the groups is interesting.
The researchers note that the difference between the two groups might not have been as dramatic for an older group of people, but the study does suggest that being confronted with “future reality” could motivate young people to start early in saving for retirement. This still doesn’t address the problem of knowing how much to save for retirement, but it could be a helpful tool for people who have a hard time thinking beyond the present.