What does choosing between eating a banana or chocolate have to do with retirement savings? It may seem like an odd question, but it actually holds key insight into the psychology behind our financial decisions.
As economist Shlomo Benartzi discusses in his TED Talk, there’s a significant gap between what most of us think we’ll do in the future and what actually happens. When asked which snack we’ll pick in a week — choosing between a banana and chocolate — most people will say they’ll pick the banana. But when the choice is actually in front of us? That’s right: We reach for the chocolate.
“Self-control is not a problem in the future. It’s only a problem now when the chocolate is next to us… This issue of immediate gratification, or as some economists call it, present bias… causes us to think about saving but end up spending.”
– Shlomo Benartzi, economist
When it comes to planning for our future, humans have a tendency to favor immediate gratification over long-term goals. We often prioritise immediate needs and desires over long-term financial security, unintentionally jeopardising our retirement goals. After all, it’s not easy to save for a future that feels distant and abstract.
It’s no wonder, then, that saving for retirement often takes a backseat to the here and now. Indeed, one of the major hurdles is this lack of emotional connection to our future selves and the inability to truly grasp the importance of long-term financial planning.
But what if there was a way to bridge the gap, to create an emotional connection that helps us see the importance of saving for our golden years? Enter data-driven video.
In this blog, we’ll delve into the fascinating psychology behind retirement savings and explore how Personalised Video can be the game-changer we need. But before we dive deeper, let’s take a moment to understand the magnitude of the problem and why a fresh approach is essential.
Behavioral Obstacles To Saving
The psychology of retirement savings is a complex field, and understanding it is crucial for finding effective solutions. Particularly, it’s important to acknowledge the behavioral barriers that keep us from saving the way we’d like.
As mentioned above, retirement, with its intangible and distant nature, often takes a backseat to more immediate needs and desires. It’s much easier to splurge on that new gadget or indulge in a lavish vacation than to imagine the impact of these choices on our future.
Other behavioral obstacles include our natural resistance to change and effort as well as our aversion to loss. In other words, the extra effort it takes to save and the framing of retirement savings as a cut to today’s spending are both tough mental hurdles that often stand in the way of a well-funded financial future.
Discussions on the psychology of retirement savings also emphasise the crucial role of emotions in financial decision-making. As certified financial planner Tim Maurer puts it, “Personal finance is more personal than it is finance.”
Think about it: When we’re emotionally invested in something, we’re more likely to prioritise it and take action. The same principle applies to retirement savings. A personal and relatable message encourages us to see the importance of securing our financial future.
David Musto, , then the CEO of J.P. Morgan Retirement Plan Services, describes how the blanket and fear-based messaging they once relied on failed because it showed “the company doesn’t know their personal life situation.” For instance, certain age groups have different motivations, and personalising the messages to them makes a much bigger impact.
“For the 20-year-old… it is about what you could have if you participate… It’s all about potential with a younger participant. But someone in their 50s, it is time to assess; they are ready at that point.”
– David Musto, CEO of J.P. Morgan Retirement Plan Services
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Maurer backs up this idea, hypothesising that as much as 80% of financial and estate-planning recommendations go ignored because these recommendations “aren’t aligned enough with the highly individualised values and goals of clients.” Clearly, a personalised approach is necessary when it comes to effectively motivating people to save for their future.
Now that we understand the psychological barriers surrounding retirement savings and the importance of emotional and personal connections, let’s explore how Personalised Video can bridge the gap.
Embracing Personalised Video for Emotional Connection
When it comes to retirement savings, numbers and spreadsheets can only take us so far. Humans are emotional beings, and connecting with people on an emotional level is often the key to driving action. This is where Personalised Video comes into play.
By harnessing the power of audiovisual communication, Personalised Video creates an emotional connection, helping us not only see but also feel the impact of our retirement savings decisions. It’s like having a friendly nudge from our future selves, urging us to take action now.
Our brains are wired to absorb and process information more effectively when it’s presented in an audiovisual format. The preference for this type of content is deeply rooted in our psychology, making it an ideal medium for delivering important or complicated messages. In fact, consumers are 3.5x more likely to prefer brands use video when they have something complex to explain.
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But what makes Personalised Video so effective in the context of retirement savings? Personalised Video taps into this age-old tradition, utilising modern technology to deliver personalised messages that evoke emotional responses. It’s all about forging a genuine connection with individuals and showing them what their future could look like.
Traditional methods of communication often fail to resonate on a personal level. However, Personalised Video changes the game by tailoring the content to each individual viewer, incorporating their unique data and circumstances.
Video pension statements are growing in popularity. Imagine receiving a video that shows you a window into the future, what you could have if you invested more into your pension now. Think of it like a map to get to your goals — or a flight plan as the video below shows. Personalised Video has the power to break through the barriers of present bias and transport you to that future, igniting a sense of purpose and motivation.
By combining personalised data, video and storytelling elements, this kind of data-driven video takes retirement savings from an abstract concept to a personal experience. It helps individuals envision their future selves, feel the weight of their financial decisions and recognise the urgency of taking action today.
Personalised Video in Action
Now that we understand how Personalised Video taps into emotions and creates a powerful connection, let’s explore some stats and real-life examples that demonstrate its impact.
At Idomoo, we’ve seen remarkable outcomes from Personalised Video pension and retirement campaigns. These include:
- 18x uplift in conversions
- 4x higher likelihood to change contributions
- 2x more pension account activations
These client results are not isolated incidents but reflect the broader impact that Personalised Video has on motivating people to save for retirement and take proactive steps toward securing their financial future.
Here’s one real-life success story that compares the results from pension members who watched the video and those who didn’t. Members who watched their Personalised Video contributed an average of 5x more to their pensions than those who didn’t watch the video.
Even more, the videos helped Standard Life improve their customers’ overall experience, with over 90% of customers who received the test pilot saying they found it useful for understanding their pensions.
Another noteworthy case is BBVA’s campaign, where Personalised Videos were used to show savers a “message from their future selves,” illustrating the potential impact of their savings decisions.
By getting a glimpse into their future, viewers’ emotional investment in their retirement goals increased. These videos helped drive a 78% uplift in long-term savings and had high engagement among viewers, showing how Personalised Video, with its ability to tap into viewers’ feelings, can inspire individuals to take meaningful action.
These examples emphasise the transformative impact of Personalised Video in the world of retirement savings. With these videos, financial institutions and organisations have been able to help their customers understand the importance of saving and motivate them to take action toward building a solid retirement plan.
Getting Personal With Personal Finance
As Nobel prize-winning economist Daniel Kahneman found, when it comes to our money, we’re more likely to be motivated by our feelings than by logic. Considering this context, pension providers need to find innovative ways to break through the psychological barriers that might hinder savings. That’s where Personalised Video steps in, transforming the way we communicate and connect with individuals on a deeper, emotional level.
Curious to learn more about our work with the world’s leading pension providers? Schedule a call and let’s discuss how we can inspire others to take control of their financial future. Trust me — your future self will thank you.
