Consumer Financial Services, Asset-Building & Savings
Published Article – Peer Reviewed | December 2012

Factors affecting completion of a matched savings program: Impacts of time preference, discount rate, and financial hardship

The Journal of Socio-Economics
Kim Manturuk, Jess Dorrance, Sarah F. Riley
Research funded by Ford Foundation

Researchers examine what factors affect the ability of lower-income people to maintain a savings account.

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There is a general consensus among researchers and policymakers that matched savings programs can significantly increase the propensity to save among low-income households. This study offers a unique contribution to the field by testing whether principals and theories from behavioral economics affect the decisions that participants make in these savings programs.

Using a sample of people participating in the $aveNYC program, a matched savings program for very low-income  households, we test whether information failure, time preference, and financial hardship affected people’s ability to complete the program and receive the match money.

We find that future orientation does not significantly impact program completion, but both information failure and financial hardship increase the hazard of early account closure. Although the pool of participants who did not receive the match was small, both information failure and financial hardship had large impacts on the risk of withdrawing the account before receiving a match. We discuss how these findings can inform program design and suggest future research.

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