Illinois Asset Building Group - Building Financially Strong Families and Communities

Choice architecture represents the context by which we, as humans, make choices.  Choice architects recognize that “neutral” design is impossible, and that seemingly arbitrary decisions – such as where to put the bathrooms in a building – are of enormous importance. Examples of choice architects include a doctor describing treatments to a patient, a health care manager creating a form for health care enrollment, a rental car operator and a parent preparing dinner.  In our daily lives we encounter thousands of messages created by choice architects intended to influence and persuade us to make certain decisions. As members of IABG we play a role in choice architecture when we create programs, promote asset building, speak with community members, meet with elected officials, and so on.  By examining principles used in choice architecture, such as principles of decision making, we can strengthen our message and identify the most effective strategies for pursuing our cause.

Principles of Decision Making

Loss Aversion: perceived loss can be greater than perceived gain. People feel worse when they lose $100 than they feel happy about finding $100. People’s choices are skewed toward avoiding the possibility of loss.

The Power of Defaults: When people are procrastinating, confused, or reluctant to make a decision, the default option becomes the most common choice.

Short-term timeframe: short-term gains or losses are more powerful motivators than anticipated final stages of wealth. We respond more strongly to the chance to get something today than to a potentially bigger payoff down the road.

Proliferation of choices: When faced with multiple alternatives, people become overwhelmed or confused and are less likely to choose any of the options.

Hassle factors: We are remarkably sensitive to hassles, even ones that are seemingly minor.

Peer influence: People are more influenced by peers than by “experts.”

Ways to Incorporate Principles into Asset Building Efforts

Reframe outreach messages:

Talk about what people have to lose by not participating. This can be as simple as saying “don’t miss this opportunity” or a stronger message like “don’t waste $500 by not calling today.”
Emphasize short-term costs and benefits (get $20 for signing up) as opposed to – or in addition to – longer-term ones (homeownership someday).
Do outreach through small group meetings and publicize that other community members have enrolled and succeeded.

Restructure incentives:

Create short-term costs/ benefits rather than (or in addition to) long-term ones, i.e. match savings at every $50 rather than only at $1,000.
Use a lottery approach. To encourage submission of follow-up data, enter those who submit in a monthly sweepstakes.

Simplify everything:

Review your process map and cut out as many steps as possible. Streamline procedures.
Revisit eligibility requirements. Use a single income limit rather than a complicated test.
Limit the number of options.
Set savings requirements in the form of income percentages, not dollar amounts.

Make it automatic:

Integrate important elements so everyone gets them.
Use direct deposit to make savings automatic and self-sustaining.
Automatically enroll people in the program.