Is Savings Automation Helpful to Liquid Savings? It Depends on Whether You Have a Savings Habit

In general, Americans are not savers, which contributes to their inability to absorb even small financial shocks and increases their potential for financial hardship. Savings automation has been promoted as a solution to overcome the behavioral constraints (or limitations) that hinder individual savings behavior. The result has been a proliferation of automated savings programs with the goal of helping people save money without their notice as a way to overcome their tendency to consume. However, scant research has examined the efficacy of this “save people from themselves” approach. This article explores the importance of having a saver mindset, regardless of income, in the success of savings automation. Results from two studies demonstrate that the benefits of automation for liquid savings accrue at a higher rate for individuals with lower incomes and that this benefit depends on the presence of a personal savings orientation. The findings suggest that savings programs should try to build a savings habit and mindset among consumers, especially for those with lower incomes.