Skip to main content

How to use nudge theory to help you save

These four apps take advantage of behavioural economics to "nudge" people to save more for retirement

Apps are betting that a regular digital “nudge” can help you save a larger nest egg for retirement

In his 2015 book Misbehaving: The Making of Behavioral Economics, Nobel Prize-winning economist Richard Thaler cites a study showing how behavioural economics can "nudge" people to save more for retirement. In the study, employees in Group A were advised to save 5 per cent of their salary in a corporate retirement plan right away, while employees in Group B were given the option of saving less initially, and raising the amount they saved by three percentage points every time they got a raise. Group B, which deferred the pain of saving until later, saved less initially, but ended up saving more over the long run.

Now, a new category of apps and tools tries to capitalize on the nudge theory to help people save. Here are four options:

Mint

Story continues below advertisement

The app automatically compiles all of your financial accounts, tracks your spending and payments, and creates a budget. Opt-in email alerts then warn you if you're about to miss a payment or you've overspent your budget for a particular category, such as takeout coffee. The downside is that for it to work seamlessly, you have to enter your banking and credit card info, which may violate your terms of agreement–and fraud coverage–with your bank.

Mylo

This app rounds up the price of every purchase to the nearest dollar and automatically directs the difference into a pre-set investment account. But as with Mint, you have to enter your personal banking details for the app to work.

Bank the Rest and Big Change

Not comfortable with handing over your banking info and password to a third party? Scotiabank offers its debit card clients the Bank the Rest option of rounding their purchases to the nearest $1 or $5–no app required–and having the change immediately moved into their savings or TFSA accounts. Customers of British Columbia's third-largest credit union, First West, can do the same using its BigChange debit card.

Koho

Koho is designed to help users save for a specific near-term goal, such as a new bike or a vacation. For each objective, you set the dollar value and the date by which you want to have the money, and the app tells you how much to set aside each day. Koho alleviates most privacy concerns by funnelling savings into a new prepaid Visa, with any purchases made using the card earning 0.5 per cent cash back.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Latest Videos

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies