If someone asked you to save more money starting today, right now, this paycheck, you’d probably hesitate. Not because you don’t want to save, but because today’s money already feels spoken for. Rent is due. Groceries need buying. The car payment isn’t optional.
But what if someone asked you to save more starting with your next raise, months from now? That feels different. Future money doesn’t have the same weight as money in your pocket right now.
Two behavioral economists noticed this asymmetry and built one of the most successful savings interventions ever tested.
The SMarT program
In 1996, Richard Thaler and Shlomo Benartzi designed a program they called Save More Tomorrow, or SMarT. The concept was disarmingly simple: instead of asking employees to increase their retirement contributions immediately, the program asked them to commit in advance to putting a portion of each future raise toward savings.
The key insight was that this bypasses three of the strongest psychological barriers to saving.
First, it sidesteps loss aversion. Because the contributions only increase when pay increases, your take-home pay never goes down. There’s no moment where you feel like you’re losing money. Your paycheck either stays the same or gets bigger, though it gets bigger by a little less than it otherwise would.
Second, it uses present bias in your favor. People systematically overvalue the present relative to the future. Asking someone to sacrifice now is hard. Asking them to commit their future self to a slightly smaller raise is easy. The sacrifice is real, but it’s displaced to a version of you that feels abstract.
Third, it leverages inertia. Once enrolled, participants stay enrolled unless they actively opt out. And most people don’t, because doing nothing is always easier than doing something, especially when “doing nothing” means continuing to save.
What the data showed
Thaler and Benartzi tested the SMarT program at a mid-size manufacturing company and published the results in the Journal of Political Economy in 2004. The numbers were striking.
Savings rates for SMarT participants increased from 3.5% to 13.6% of income over 40 months, a nearly fourfold increase. 78% of employees offered the plan joined, and 80% stayed through the fourth pay raise.
To put that in context: the employees who received standard financial advice from the company’s investment consultant increased their savings rate too, but only from 4.4% to 8.8%. The SMarT participants nearly doubled that improvement, and they did it without any financial education, without budgeting tools, and without ever being asked to make a sacrifice in the current moment.
The retention numbers are equally telling. Virtually everyone (98 percent) who joined the plan remained through two pay raises. Eighty percent stayed through the fourth. This is almost unheard of for any financial behavior change intervention. Most programs see steep drop-off within weeks.
Why it worked so well
The SMarT program didn’t succeed because it gave people better information or stronger motivation. It succeeded because it was designed around how people actually behave, not how economists assumed they should behave.
Consider the standard approach to retirement savings at the time. A financial advisor would sit down with an employee, show them a projection of their retirement needs, and recommend a contribution rate, often a substantial increase from what they were currently saving. The employee would nod, agree it made sense, and then frequently not follow through.
In Thaler and Benartzi’s study, a group of employees were offered exactly this kind of advice. The consultant recommended they increase their savings rate to around 5 percent of income. Many of the 207 employees in this group didn’t accept even that modest increase. Of those who declined, 162 (78 percent) agreed to join the SMarT plan instead.
The difference wasn’t knowledge or motivation. It was timing. The same people who couldn’t bring themselves to save more today were perfectly willing to save more starting with their next raise.
The broader implications
The SMarT study didn’t just demonstrate an effective retirement savings program. It demonstrated something more fundamental: the gap between what people intend to do and what they actually do can often be closed not by persuasion, but by design.
This is the core insight of behavioral economics applied to personal finance. People aren’t failing to save because they’re irresponsible or because they don’t understand compound interest. They’re failing to save because the default systems surrounding them make saving hard and spending easy.
The U.S. personal savings rate as of late 2025 hovered around 3.5 to 4.9 percent of disposable income, according to the Bureau of Economic Analysis. That’s not dramatically different from the 3.5 percent starting point of the SMarT participants before the intervention. The problem hasn’t changed. Most people save too little, and they know it.
The U.S. personal saving rate was approximately 3.5% to 4.9% of disposable income in 2025, roughly the same starting point as the SMarT program participants before the intervention.
What the SMarT research shows is that the solution doesn’t require more discipline, more financial literacy, or more sophisticated budgeting. It requires better defaults.
How to apply this to your own finances
You probably don’t have access to a formal SMarT program at your workplace. But the principles are portable. Here’s how to adapt them.
Commit to saving from future raises, not current income. This is the pay yourself first principle applied with a time delay. The next time you get a raise, route at least half of the increase directly into savings before it ever hits your spending account. Your lifestyle stays the same. Your savings grow with every raise. This is the exact mechanism that made SMarT so effective.
Use automatic escalation. Some savings accounts and 401(k) plans let you set an automatic annual increase in your contribution rate (say, 1 percent per year). This mirrors the SMarT structure and takes advantage of the same inertia that kept 80 percent of participants enrolled through four pay raises.
Set it up before you need the willpower. The SMarT program asked people to commit months before the first increase took effect. That temporal distance is important. When you’re planning for the future, you’re more rational about trade-offs. Set up your automatic transfers during a calm moment, not when you’re staring at an empty fridge and a credit card bill.
Don’t start with the “right” amount. Start with any amount. The SMarT participants began at 3.5 percent. That’s not a lot. But the program’s power was in the trajectory, not the starting point. A small automatic transfer that grows over time will outperform an ambitious savings plan that you abandon after two months.
The design matters more than the discipline
Thaler won the Nobel Prize in Economics in 2017, in part for this work. The Nobel committee specifically cited his demonstration that “people’s decisions can be influenced by the design of the choice environment.”
That phrasing is important. It’s not about tricking people into saving. It’s about recognizing that the choice environment matters: how options are presented, what the defaults are, and when decisions are made all shape outcomes more than raw intention does.
The SMarT program didn’t make people want to save more. It made saving more the easy, default thing to do. That distinction is the whole lesson.
The best savings tools follow this same philosophy. Rather than asking you to budget harder or track every dollar, they focus on making your savings goals visible and your progress automatic. The research is clear that this approach works better, not because it’s cleverer, but because it respects how people actually make decisions.
The most effective financial strategy isn’t the one that requires the most effort. It’s the one you’re still following a year from now. Thaler and Benartzi proved that with 162 factory workers and four pay raises. The principle applies to everyone.