Building Financial Security with Rules of Thumb

At Commonwealth, we’re exploring how rules of thumb (RoT) - simple, memorable, actionable, broadly applicable messages that are inexpensive to produce and disseminate - can be used to improve financial security. They provide consumers with a concise direction regarding a behavior to take that is associated with a positive outcome.

Thoughtful design and delivery are essential when crafting RoT. We first learned this lesson when designing RoT for revolving credit card debt, and it was reaffirmed in our recent experience creating RoT for student loan borrowers.

In 2015-2016, Commonwealth – in partnership with the CFPB, the Urban Institute, and the Arizona Federal Credit Union– studied the impact of rules of thumb on credit card debt. The study found that the balances of the credit borrowers in the sample who had received rules of thumb decreased. Given these promising results, Commonwealth was interested in exploring the impact of RoT on borrowers of non-revolving debt.

In 2016-2017, we partnered with American Student Assistance - a non-profit that provides students with tools and resources to succeed after high school, including information about student loans. We tested several different rules of thumb with student borrowers that provided guidance around decision-making and action-taking for borrowers in standard repayment and delinquent borrowers.  The results were inconclusive due to the challenges of the quality of the data that we were able to collect and the e-mail delivery channel for the messages.

Having now conducted two tests of rules of thumb, Commonwealth has identified several key considerations for design and implementation.

  • Context matters: Will the target of the rule of thumb be receptive to the message? If the recipient of the rule is pre-disposed to want to take the action, for example pay down their credit card debt, a rule of thumb may go a long way to making that happen. In contrast, if they resent the very existence of their student loan, a rule of thumb may not be enough to motivate them to take action.
  • Channel matters: Does anyone read email anymore? Of course, we all look for some emails and ignore a lot of others. Whatever serves as the vehicle for the rule of thumb should have a proven record with the recipients of being one with which they are likely to engage.
  • Message matters: Is the content of the rule of thumb practically actionable? While the message might be a good guide, if it is unrealistic for the recipient – for example, they don’t have the tools to implement the suggested behavior - then it will fall on deaf ears.  
  • Messenger matters: How does the recipient feel about the sender? Whether by email or some other means, the recipient has to trust the sender of the message. If they think the sender has bad intentions, resents the sender, or has another negative association, they are more likely to discard the message out of hand.

In order to design with these principles in mind, get feedback from your users early and often during the design process, consider the unique attributes of the target audience for the rules of thumb, and pre-test the efficacy of the message channel and trust of the messenger. If done well, rules of thumb hold the promise of being effective in impacting many different financial challenges and improving financial security.

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