The Save More Tomorrow Story
Back in 1996, two professors had an idea to increase savings within 401(k) plans. They knew that even employees who joined 401(k) plans saved little because they didn’t want to increase savings and see their paychecks shrink – a classic example of “loss aversion.” The professors also knew that most employees wanted to save more, but that this loss aversion, together with simple inertia, made increasing savings difficult. Their idea was to increase savings when workers got a pay raise, because when a portion of a raise goes into savings, employees don’t feel as though they’re losing. Their Save More Tomorrow program was first put in practice by a company in 1998, and the idea had since spread around the world.