CLICK HERE for full resolution image


Many Americans have a hard time saving, however, low-income
Americans have a particularly difficult time saving. This in part is due to
people living from paycheck to paycheck, but another theory (Tufano et al.;
HBS) states that low-income Americans don’t care much for traditional
compounded interest; however, if they had the opportunity to win money (motivation,
in Fogg’s words) in a prized-linked savings they tended to save money. The
study stated that if people had the chance to gain money in a low amount of
compound interest or forfeiting that interest for the chance to win a large
amount of money, they would forgo that interest.


Our app, Clarify Finance is based off of this study. The app
analyzes people’s saving goals and spending habits across multiple categories
and provides suggestions to save a certain amount of money every pay cycle based
off of their income level and saving goals. These suggestions would pop up
every time the user received their paycheck, as an option to set the suggested
amount aside. This is because the moment they receive their paycheck is their
moment of highest ability, as said by Fogg, and that’s when we want to trigger them. If they reached certain saving milestones
they would be entered into lotteries of varying amounts. Prize-linked savings
is effective because many low-income Americans see their chance of building
wealth by playing the lottery than traditional savings with compounded
interest. Our apps’s data analytics will keep track of what lottery amounts successfully motivate people into saving, and use that data to continue improving the algorithm.

Another variable we will include in our app, to encourage
more savings, is withdrawal fees. A study by Beshears, Laibson et al suggests
that many people tend to opt into savings accounts with withdrawal fees than if
there was no fee. This is another motivation factor. However, the study also
says that if there is an ability to earn interest [1] then withdrawal fees
would no longer be a motivating factor in getting people to save money [2]. We
would perhaps test this to see if high restrictive fees would help them save
toward their long term financial goals such as saving up to travel and vice


Ultimately, our goal in having these functions is to
influence low-income Americans to save a nominal amount of money (saving even
more money a month given the chance to win a higher amount of money) over a
long-period of time. We also think it’s important to include financial goals
because this allows people to actively put money aside towards things they want
to achieve, something many people struggle with. People who use Clarify Finance
will also be able to see how they are spending each month across several
“categories” we assign (such as food, transportation) and we can provide them
notifications as they approach the amount they budget each month. We will
suggest light biweekly amounts to spend based off of their income [3]. So to
sum it up, the three things we would collect data on is what degree of prizes
can encourage more savings, whether withdrawal fees impacts whether people will
keep their money saved toward their long term goals and whether our app
notifications for them to stick to their budget helps them keep to it.




[1] Which in our app would be the chance to win a

[2] Fogg Behavior model

[3] We would ask them to input the amount they spend on rent
to help determine a budget