Save
Are ‘nudges’ the secret ingredient to financial wellness?
Are better financial habits a simple reminder away?
Are ‘nudges’ the secret ingredient to financial wellness?
Making good financial decisions can sometimes be as difficult as breaking bad ones.
Fortunately, sometimes all it takes to make smarter choices when it comes to your money is a timely reminder.
The Commonwealth Bank’s chief data and analytics officer Dr Andrew McMullan said that behavioural science suggests that consumers see unexpected or windfall gains as different from our regular income.
“We tend to mentally put these funds into a ‘free money’ category which means we’re more likely to spend these funds without considering opportunity costs,” he said.
Citing recent research done by the bank’s financial wellbeing team, he said that well-timed nudges could make all the difference when it comes to how consumers allocate their money.
As part of its research into financial behaviours, CBA ran a trial program where it prompted customers who incurred credit card interest to think about how they planned to use their annual tax refund.
Accompanied by information about the benefits of reducing their debt, the bank found that these nudges often resulted in a shift around the individual spending behaviours of consumers.
All told, CBA found that customers who engaged with the credit card repayment nudges tended to repay an average of $541 more in the month following their tax refund.
Pointing to the success of these trials, Dr McMullan said that if the credit card nudge was rolled out to all eligible customers, it could result in more than $4 million in “catch-up” credit card repayments being made each year.
“The results highlight that proactively contacting customers in a targeted manner and at the right time can help them to follow through on their intentions and make meaningful progress towards their goals,” he said.
Dr McMullan said that tax time is an ideal opportunity for many Australians to accelerate their financial goals, “whether that is getting back on track with their debts, saving for a rainy day, or investing”.
Speaking to nestegg earlier this year, CBA head of behavioural economics Will Mailer said much the same. He noted that an annual tax refund is often one of the biggest single cash deposits a typical household receives in a given year.
Referencing a recent study conducted by the University of Chicago, Mr Mailer explained that individuals often interpret “extra” money as more easily spendable than their own hard-earned income.
However, researchers also found that individuals given extra cash as a rebate or refund saved the entire sum at a far higher proportion than those given it as a bonus.
“As such, an end of financial year tax refund is a golden opportunity to progress on a goal, recover from a setback, or build up a buffer for the future,” he said.
RELATED ARTICLES
About the author
About the author
Savings account
Protecting your savings from inflation in Australia
Inflation is an economic phenomenon that erodes the purchasing power of money over time, directly impacting the real value of your savings. In Australia, as in many parts of the world, periodic rises ...Read more
Savings account
Maximising your savings effortlessly: The power of automation in Australia
In the fast-paced world we live in, managing finances can often become an overlooked aspect of our daily routines. However, the advent of technology has introduced a seamless solution to this ...Read more
Savings account
Maximising your savings account: What you need to know
Saving money is a fundamental aspect of financial security and wellbeing. Read more
Savings account
Afterpay launches Money app, bank accounts and retroactive BNPL
Afterpay is upgrading its app-based arsenal. Read more
Savings account
2020 saw the fastest increase in bank deposits since the GFC
Bank deposits of Australian households increased by more than 12 per cent last year. Read more
Savings account
Australians are putting savings goals ahead of holiday plans
While travel restrictions are soon set to ease, Australians are still putting their savings goals first. Read more
Savings account
More than half of Aussie Millennials don’t have a savings plan
Money is remaining a taboo subject for Millennials, which is leading to poor saving habits, a big four bank has revealed. Read more
Savings account
COVID-19 sees Aussies reach record-high wealth
New stats have revealed that Aussies are now richer than ever, having stashed away their cash during a year marred by the COVID-19 pandemic and the resulting economic shutdown. Read more
Savings account
Protecting your savings from inflation in Australia
Inflation is an economic phenomenon that erodes the purchasing power of money over time, directly impacting the real value of your savings. In Australia, as in many parts of the world, periodic rises ...Read more
Savings account
Maximising your savings effortlessly: The power of automation in Australia
In the fast-paced world we live in, managing finances can often become an overlooked aspect of our daily routines. However, the advent of technology has introduced a seamless solution to this ...Read more
Savings account
Maximising your savings account: What you need to know
Saving money is a fundamental aspect of financial security and wellbeing. Read more
Savings account
Afterpay launches Money app, bank accounts and retroactive BNPL
Afterpay is upgrading its app-based arsenal. Read more
Savings account
2020 saw the fastest increase in bank deposits since the GFC
Bank deposits of Australian households increased by more than 12 per cent last year. Read more
Savings account
Australians are putting savings goals ahead of holiday plans
While travel restrictions are soon set to ease, Australians are still putting their savings goals first. Read more
Savings account
More than half of Aussie Millennials don’t have a savings plan
Money is remaining a taboo subject for Millennials, which is leading to poor saving habits, a big four bank has revealed. Read more
Savings account
COVID-19 sees Aussies reach record-high wealth
New stats have revealed that Aussies are now richer than ever, having stashed away their cash during a year marred by the COVID-19 pandemic and the resulting economic shutdown. Read more
More articles
OUR PLATFORMS AND BRANDS
- Accountants Daily
- Accounting Times
- Adviser Innovation
- Australian Aviation
- Broker Daily
- Cyber Daily
- Defence Connect
- Fintech Business
- HR Leader
- Independent Financial Adviser
- Investment Centre
- Investor Daily
- Lawyers Weekly
- Money Management
- Nestegg
- Property Buzz
- Real Estate Business
- Smart Property Investment
- SMSF Adviser
- Space Connect
- Super Review
- The Adviser
- Wellness Daily
- World of Aviation
EVENTS AND SUMMITS
- Accountants Daily 30 Under 30 Awards
- Adviser Innovation Summit
- Australian Accounting Awards
- Australian Aviation Awards
- Australian Broking Awards
- Australian Defence Industry Awards
- Australian Law Awards
- Australian Space Awards
- Australian Space Summit
- Better Business Summit & Awards
- Broker Daily Business Awards
- Corporate Counsel Summit & Awards
- Cyber Security Summit & Awards
- Defence Connect Budget Lunch
- Defence Connect DSR Summit
- Fund Manager of the Year Awards
- ifa Excellence Awards
- ifa Future Forum
- Investor Daily ESG Summit
- Lawyers Weekly 30 Under 30 Awards
- Lawyers Weekly Women in Law Forum
- New Broker Academy
- Partner of the Year Awards
- REB Awards
- Reinnovate
- SME Broker Bootcamp
- SMSF Adviser Technical Day
- Super Fund of the Year Awards
- Women in Finance Awards
- Women in Law Awards
- Accountants Daily Podcast Network
- Australian Aviation Podcast Network
- Broker Daily Podcast Network
- Defence Connect Podcast Network
- HR Leader Podcast Network
- REB Podcast Network
- Relative Return
- Space Connect Podcast
- The Adviser Podcast Network
- The ifa Show
- The Lawyers Weekly Show
- The Smart Property Investment Show
PODCASTS
LEARNING AND EDUCATION
MOMENTUM MARKETS NETWORK
LINKS
STAY CONNECTED
Make your nest egg grow. Register now for nestegg updates.