Nudges to Save, Nudges to Reduce Debt: A Randomized Trial of Tax-Time Behavioral Interventions

This project will conduct pilot activities for a randomized controlled trial investigating the impacts of behaviorally-informed “nudges” on savings or debt reduction behavior at tax time. We will partner with VITA sites operated by the Baltimore CASH Campaign. We will randomly select a subset of clients to receive postcards encouraging them to use their tax refund to save or pay down debt. In addition, we will test the timing of these messages to determine if sending messages well in advance of the individual’s tax preparation appointment can increase savings and debt reduction more than nudges provided closer to the appointment date. We will measure the impacts of these messages on (1) use of tax form 8888 to split a client’s refund, as well as survey data on the client’s intended use of the funds (for debt reduction or savings); and (2) savings and debt levels, measured through survey data and credit report pulls. Pilot activities will include streamlining intake forms to improve data collection and field testing data collection and randomization protocols. The results of this study will provide important insights into the power of low-cost messages to help low-income individuals overcome behavioral barriers to wealth accumulation.