4 ways to help consumers build savings when budgeting flops

Behavioral science testing indicates that budgeting doesn't really work as advertised for many people. However, banks and credit unions that want to help consumers improve their financial wellness have useful alternatives to try.

Budgeting — tracking expenses and planning how much to spend in specific categories — is often heralded as invaluable. It’s considered a basic of financial literacy by many and countless financial apps use it in one way or another. But how valuable is it, really?

To test whether budgeting actually helps people reach financial goals, we partnered with a large fintech to run an experiment. We randomized over 9,000 people into three conditions: one control group; one group that set a single budget for the week; and one that set an overall budget as well as sub-categories.

We then tracked how budgeting affected spending.

The results? People in the two experimental groups looked at their budgets more. However, did that help them stick to said budgets? In a word, no.


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