Financial Education and Commitment Savings Contracts to Reduce Credit Card Reliance and Mobilize Savings among Low-Income U.S. Households

This project will evaluate the effectiveness of financial education and commitment contracts in promoting higher levels of saving, reduced reliance on credit card debt and healthier financial portfolios among low-income individuals in the United States.  U.S. households in the bottom quartile of wealth spend, on average, more than they earn, and many low-income consumers lack formal savings accounts. Consumers tend to have time-inconsistent preferences for savings and consumption; they tend to be more impatient in the near-term than in the long-term and thus have a propensity to make purchases that are later regretted.  This project will evaluate the impact of commitment devices as a mechanism for mitigating time-inconsistent tendencies in spending, borrowing and saving.