Nudging

Nudging is a concept from behavioural economics: people are guided towards better decisions through clever design ("choice architecture") – without coercion, without bans, without financial incentives.

Financial nudges that work:

1. Default effect (opt-out instead of opt-in):

• Company pensions: if employees are enrolled automatically (and would have to opt out actively), participation rises from 30% to over 90%
• Organ donation: countries with opt-out (everyone is a donor unless they object) have donor rates of 90%+ vs. 20% with opt-in

2. Automatic escalation:

• "Save More Tomorrow": the savings rate rises automatically with every pay rise. Result: the savings rate triples in 4 years

3. Social norm:

• "80% of your neighbours have reduced their electricity consumption" → you do it too

4. Simplification:

• The easier the access (e.g. an ETF savings plan with 1 click), the more people use it

How YOU can use nudging:

✅ Set up a savings plan automatically (default: saving)
✅ Take the credit card out of your wallet (more effort for spending)
✅ Install a savings app that reminds you of your goals