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Behavioral Design Guide: Tools To Manage Spending

See how to design tools that help people manage their spending and improve financial health outcomes by applying promising approaches from behavioral science.

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By Hannah Gdalman, Heidi Johnson, Zaan Pirani

Tuesday, December 19, 2023
Behavioral Design Guide: Tools To Manage Spending
The Challenge

Millions of Americans Struggle With Overspending

In 2023, spending less than or equal to income, one of the eight indicators that determine a person’s financial health, was at the lowest rate seen in the six years that the Financial Health Network has released national statistics about financial health. Spending more than income can mean draining savings or taking on debt to cover expenses, which can lead to greater financial insecurity or challenges with managing credit.

More than 1 in 5 households spent more than their income in 2023.

The Opportunity

Create Tools To Help Consumers Manage Their Spending Effectively

Financial services providers have an opportunity to deliver effective spending tools to help consumers at any income level where discretionary spending is an option. By responding to customers’ financial health needs, financial institutions can build stronger customer relationships and benefit from a customer base that is better equipped to stay current with debt, build savings, and buy products and services that support long-term goals. Customers who believe their financial institution supports their financial health are:

    • 3X more satisfied
    • 3X more likely to refer a new customer
    • 5X more likely to buy additional products and services
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Behavioral Design for Financial Services Providers

Behavioral science is a powerful tool for institutions to support broader equity strategies, deliver effective products at a low cost, and unlock better business and customer outcomes. This guide offers payments, banking, personal financial management (PFM), and financial coaching providers:

    • Insight into the behavioral science principles that shape spending behavior
    • Specific recommendations for designing behaviorally-informed tools to manage spending
    • Real-life examples of successful behavioral design in spending tools to jump-start innovation

Behavioral Design in Action: Improving Budget Accuracy

Expense prediction bias occurs when people forecast future expenses based only on their most typical and predictable expenses (such as groceries, rent, or utilities bills) and can lead to overspending if people fail to account for other common expenses when setting a budget. Providers can help consumers set more realistic budgets by encouraging them to consider why their future spending might be different. A study with users of a PFM app in the United Kingdom found that people who were asked to list at least one reason why their spending might be different in the upcoming week predicted their spending with significantly more accuracy.

By understanding what drives consumer decisions, financial services providers can design products that work with cognitive biases and mental shortcuts to promote financially healthy decision-making.

Our Supporter

This guide is made possible through the generous support of MetLife Foundation, a founding supporter of our financial health work.

Explore Our Behavioral Design Guides

Our Behavioral Design Guide series compiles rigorous research to provide product managers, designers, and strategists with a behavioral framework for building financial health products. Read other guides from the series here.

Written By

Hannah Gdalman

Hannah Gdalman

Manager, Financial Services Solutions
Financial Health Network
Heidi Johnson

Heidi Johnson

Senior Director, Behavioral Economics
Financial Health Network
Zaan Pirani

Zaan Pirani

Manager, Financial Services Solutions
 

Behavioral Design Guide: Tools To Manage Spending

Explore the trends. Discover new insights. Build stronger strategies.

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