Meet the Economist Who's Helped Millions Save More Money


As a behavioral economist, Shlomo Benartzi spends a lot of time thinking about what we’re thinking about—and researching ways to help us make smarter choices. Because, let’s face it, we don’t always make decisions that are good for us, whether it’s eating one too many donuts or charging more than we can easily pay off on our credit cards.

Fortunately, Benartzi’s had a lot of success helping people fight those urges, leading millions to save more, spend less and better understand (then correct) their own bad impulses. We asked him to share some advice on tackling common money challenges, like how to save when you don’t have much left over and easy ways to improve your spending habits—plus, the best financial advice he’s gotten.

Nearly 20 years ago, you and Nobel Laureate Richard Thaler developed ‘Save More Tomorrow,’ a program that helps people shore up a secure retirement. Can you tell us more about that?

Save More Tomorrow [is] a savings tool that consists of three central components: First, we asked people to commit now to saving more in the future. This helps them avoid ‘present bias,’ or the tendency to overvalue immediate rewards at the expense of long-term intentions. Second, we proposed that increases in their savings rates were linked to future pay raises. This minimizes the influence of loss aversion—the tendency to experience the pain of loss more intensely than the pleasure of an equivalent gain—since their take-home pay never decreases. Third, once enrolled, [employees] remained in the program unless they opted-out. This makes good use of inertia, which is the tendency to stick with your current path.

According to the latest calculations, it’s estimated that [Save More Tomorrow] has helped approximately 15 million Americans significantly boost their savings rate.

Why focus your research on retirement?

Because there’s an urgent need. A few decades ago, most workers were able to rely on pensions from their companies; [now] that model no longer applies to the vast majority of American workers. According to [one] estimate, more than 40 percent of workers are now classified as “contingent,” which means they have a less stable paycheck and will be solely responsible for managing their own savings.

What would you say to someone who thinks he doesn’t have enough to save and invest?

I’d tell them not to be intimidated. It’s okay to start small. Then once you get started, it’s important to gradually boost your savings... You’ll be pleasantly surprised by how the money adds up.

What is another effective way we can create better money habits?

Self-experimentation. Research shows that many people spend money on products and experiences that don’t reflect their true preferences. For example, we buy expensive wine because we think it is better, but in blind taste tests, people often end up preferring the cheaper alternative. The point is that unless you try multiple options and alternatives, you might be spending money on the wrong stuff.

What money lessons did you learn growing up?

The most valuable lesson I learned as a child is that great gifts don’t have to cost a lot. In the United States, we often assume that the value or meaning of a gift is closely related to how much it costs, but nothing could be further from the truth. The most valuable gift I received during my childhood was a rescue animal that cost nothing at all.

What’s been your best investment?

My best investment has been a crazy startup I invested in—mostly because it was founded by my dear cousin—which has been very successful. I could pretend that I made this investment because I’m a very smart behavioral economist with a talent for predicting future technological trends. However, the reality is that I just got lucky.

For me, this investment is an important reminder that much of our success is due to luck and contingency, not intelligence or ability. Too often, we suffer from a mental tendency called the outcome bias, in which we evaluate the quality of a decision based on the outcome. Given the huge role of luck, though, we should primarily evaluate our decisions based on whether or not they properly reflected our preferences and values.

What's the best financial advice you’ve received?

Someone once told me that money can’t buy happiness, but that happiness can get you money. What I take that to mean is that we spend a lot of time obsessing over money when the reality is that there are plenty of miserable rich people. What we should focus on instead is finding pursuits and projects that bring us meaning and joy. I truly believe in the old saying that if you find a job you love, you’ll never work a day in your life. When you do what you love, you’re also better at it, which means you’re more likely to be successful and make money.