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A new nudge
John Beshears from Harvard Business School, along with three other co-authors, published a 2021 study titled “Using Fresh Starts to Nudge Increased Retirement Savings.” The use of the word Nudge instantly caught my attention as it is a reference to one of the sacred texts in behavioral finance, “Nudge,” written by Richard Thaler.
For those unfamiliar, a nudge is essentially a psychological “hack,” for lack of a better term, that makes it easier for people to make better decisions.
A perfect example of a personal finance nudge is for employers to force their workers to “opt-out” rather than “opt-in” to retirement plans. Since the majority of people go with whatever the default option is, making “opt-in” the default will mean many more workers end up contributing to a retirement plan which makes them better off.
A good nudge understands the human mind is irrational but finds clever ways to push them towards a more rational outcome.
This new paper is exciting because it discovers a simple nudge that will make it easier for people to save money.
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