How many times have you written a list of New Year's resolutions, only to find that piece of paper stuffed in a drawer six months later and realize you haven't made any progress on your goals? Anyone who's ever tried to quit smoking multiple times or raised a bet with a losing hand in poker can attest that humans frequently act in ways that are contrary to our own best interests. This type of irrational (or imperfectly rational) behavior creates serious financial challenges for many Americans, especially when it comes to saving for emergencies, college, or retirement; and end-of-life or big purchase decisions. Around 1.5 million Americans file for bankruptcy every year.
Now, the MetLife Foundation—a huge funder of financial inclusion work that we track closely—has committed $7.9 million over the next three years in a partnership with Duke University to help Americans improve their saving and spending habits. By looking at the problem through the lens of behavioral economics, Duke's new CommonCents Lab seeks practical ways to align our best intentions with our actual financial decisions.
"Most people know that saving for emergencies, college and their retirement is great—and they want to save. But knowing what is helpful and taking action to achieve it are two different things," said Dennis White, president and CEO of MetLife Foundation.
The Latino Community Credit Union and the Duke Credit Union are already on board as partners in this initiative, but three slots are still available and proposals are being accepted until January 15, 2016. Organizations that offer programs for low- to middle-income Americans are eligible, including: credit unions and banks; community colleges and universities; nonprofits, for-profits, faith-based groups and government agencies. Partners will receive unrestricted grants ranging from $5,000 to $25,000 to offset costs of participation.
CommonCents Lab, part of the Center for Advanced Hindsight at Duke University, will work with partners to develop innovative and scalable approaches to improving financial well-being and stability. Applying behavioral economics to decision making could clarify why more Americans are not planning for retirement or participating in savings programs, for example. A key goal of the program is to convert hypothetical academic theory into proven, real-world solutions.
In 2013, we wrote about the MetLife Foundation's strategic move to focus solely on financial inclusion with a five-year, $200 million commitment to help low-income families and individuals in the U.S. and worldwide. Earlier this year, we looked at the organization's efforts to improve financial inclusion in rural China, as well as its partnership focused on microfinance institutions in Mexico, Columbia, Bangladesh, and Vietnam.
This new initiative aims to help Americans who know they should be saving for a rainy day, but somehow always find themselves without an umbrella when the downpour comes. Changing human behavior is a daunting task, but CommonCents Lab is going to give it a shot. Who knows? Maybe they'll have a breakthrough that helps me stick to my New Year's resolutions until at least March.