Evaluation
Present-biased preferences, or the tendency to value immediate rewards over greater benefits in the future, may contribute to persistent poverty, preventing low-income households from accumulating savings, making investments, and rationing their resources over time. However, there is little rigorous evidence to confirm that present-biased preferences and related self-control problems lead to poor savings decisions. Researchers designed and tested a savings product that offered monetary rewards to low-income tax payers in the United States if they saved or committed to save their annual tax refund for a period of eight months. Results confirmed that the low-income filers had present-biased preferences and that the incentives increased the numbers of individuals who chose to save their taxes.