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October 15, 2013

FAI Video: Dean Karlan Discusses Commitment Savings Research


Part of our series, In Conversation with FAI


Read an excerpt from the transcript:

Dean Karlan: Hi. We all have weaknesses. Sometimes it’s exercise. Sometimes it’s eating. Sometimes it’s spending money on frivolous things. This is true whether we are rich or poor, fat or slim. The challenge we all face in life is how do we make these trade-offs. How do we trade off the things we say we want to do and the things we actually do. How do we, for instance, set a plan and then fulfill that plan?

When we think about this in the savings space, it’s a very important issue, particularly for the poor, because there are a lot of things that tempt us on a daily basis. If we want to be able to accumulate savings so that we can have a nest egg for a rainy day or if we live in an agricultural setting and we want to have a nest egg so that when it’s planting season we have enough money to buy fertilizer to invest in a farm – how do we manage to get money away from ourselves and safe, in a place and committed, so that it doesn’t get spent, so that it can be used at the time of need?

This is the challenge that the poor face around the world because they don’t have the luxury, for instance, of a certificate of deposit or a retirement savings account, which are very natural commitment savings accounts that we have access to in the developed world. So, one of the things we tested in the Philippines was whether giving people a way of tying up their money could actually lead to real changes in behavior, real changes in outcomes for the household.


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