Claim 3 of 22
Pay yourself first: save before you spend
Does saving automatically make people save more?
Verdict
Holds with conditions
The paper's own results support pre-committed saving out of future pay rises as a way of raising saving rates among employees who agree to join, and the condition is that the household has income left after essential spending, because the national ratios show only average room.
The cost, from the book's own figures. Taken without the condition, the claim passes over households with no income to move: at the US ratio of 4.1 per cent, reaching 10 saved means a cut of 5.9 in every 100 of income, which is 6.2 per cent of spending.
Made by: Bach, Sethi, Pape, Robbins, Clason, and Stanley and Danko.
Test it on your own numbers
- United States: IRS, 401(k) plans (irs.gov/retirement-plans/401k-plans), to compare its automatic enrolment guidance for these employer-run retirement plans with the plan on offer.
- United Kingdom: GOV.UK, Workplace pensions (gov.uk/workplace-pensions) and its contributions table (gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay), to check what you and your employer pay.
- Australia: Moneysmart savings goals calculator (moneysmart.gov.au/saving/savings-goals-calculator), to see how long a regular amount takes to reach a goal.
The full test, with every figure dated and sourced, is in chapter 3 of the book.