How Tech Can Help With 3 Behavioral Finance Biases

Some savings apps aim to encourage saving through having users set up explicit goals or automatic savings triggers. Others boost savings behind the scenes by rounding up purchases or by quietly siphoning money into a savings account when past spending patterns indicate that it’s not needed. The technology helps address both procrastination related to saving, and to the extent saving takes place automatically behind the scenes, loss aversion.

For example, Acorns rounds up users’ everyday transactions and invests the change into a diversified portfolio. Elsewhere, Qapital allows users to save with rules or triggers, eliminating willpower. Users can charge themselves for guilty pleasures with a “fine”; challenge themselves to underspend their budget and save the differential; round up purchases and save the change; or autosave a set amount daily, weekly or monthly. Alternatively, users can have savings triggered by anything from rainy weather to meeting their exercise goals, and they can post savings goals on social media for peer support.

To be sure, some of these app features have been around a long time in other forms; many employers, for instance, have long offered employees the option of automatic withdrawals from paychecks directly into 401(k) accounts. Also, at least for now, some of these technologies may be most helpful for achieving smaller, near-term savings goals.

In addition, these kinds of offerings and services often don’t come for free, and if they are advertised as free, users should make sure they’re aware of how the firm plans to use their personal data. Finally, while financial advisors can generally still offer more holistic and customized advice, these apps can help you stay on track day-to-day and avoid succumbing to behavioral biases.


Nelli Oster, PhD, is a Global Investment Strategist for the BlackRock Investment Institute. She writes about behavioral finance for The Blog.