Getting Odysseus to Save: Evidence from a Commitment Savings Product in the Philippines

We designed a commitment savings product and implemented it using a randomized control experiment in the Philippines. This savings product was intended for individuals who want to commit now to save later, and who were sophisticated enough to engage in such a mechanism. Before offering the product to the treatment group, we conducted an extensive baseline survey on all participants in the study. We included hypothetical time discounting questions with reference to money, rice and ice cream. Those who exhibited hyperbolic time preferences were indeed more likely to open the commitment savings account. By mapping these hypothetical questions to real behavioral decisions, we address an extensive debate about the validity of these questions to measure true preference reversals. Of the 723 individuals offered the product, 198 (27.4 percent) opened the account. After six months, average bank account savings increased by 20 percent in the treatment group relative to the control group (ITT); those who opened the account increased savings by 85 percent (TOT). Among those with prior positive balances, the treatment group participants have a 14.7 percent higher probability of increasing their savings by more than 10 percent and 9 percent higher probability to increase by more than 50 percent, relative to the control group participants. We conclude that the product features effectively targeted individuals who most needed a commitment product, and that it had an economically and statistically significant impact on their financial savings