Persuasion can be everything—and a new research paper says that finding the right way to frame the need to save for retirement can persuade younger people that they need to boost their savings level.

According to “Saving for Tomorrow Today: How Message Framing Can Improve Retirement Savings Rates for Younger Workers,” recasting the arguments in favor of saving more could change the behavior of young people—and older people, too—and encourage them to do better.

Part of the problem is that people behave differently based on whether they think something will happen in the near future or in the distant future, the research says. The farther away in time an event is, the more abstractly people think about it, only refocusing on the practical aspects of it as it draws nearer and requires action.

According to the study, not only do 80.3 percent of younger households (between the ages of 25–34) not meet their suggested saving targets, a Vanguard study of the universe of its retirement plans reports that younger people are less likely to participate than any other age group.

The paper reports the outcome of a pair of studies the researchers conducted to test, in essence, marketing approaches. One reveals that millennial workers respond better to abstract, not concrete, advertisements recommending savings, while boomers’ savings rates are not affected by the type of advertisement. The second indicates that younger workers’ savings intentions increase further when the savings goal is presented using concrete messaging and as a milestone, instead of as a distant goal.

Another study’s finding that a social marketing approach can increase plan participation among new employees, which was not age-specific, indicates that those employees lack basic information on how to open a retirement savings account. It also reveals that 6.8 percent of the younger employees report that it was “[h]ard to think that far in the future” compared to 0.0 percent of the older employees.

Temporal construal theory says that younger workers would naturally think about retirement in abstract terms, because for them it is an event that will happen in the distant future, while older workers would naturally think about retirement in concrete terms, because for them it is an event that will happen in the near future.

Providing abstract messages to younger workers encouraging them to save more gives them information in a format that’s easier for them to process, resulting in improved savings rates, while abstract messages have no effect on older workers.

In addition, providing younger workers with a specific milestone savings goal, such as a particular amount from each paycheck, improves their savings rate -- but providing them with a general long-term goal, such as how much they need altogether for retirement, does not.

Instant Insights /

Proper framing can influence young employees to save for retirement

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