Research : Contribution To Existing Research

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Commentary
Contribution to Existing Research
Earmarking is a controversial issue for existing research. On the one hand, some existing experiments have concluded that is a method for increasing both people’s savings and people’s self-control (Thaler, 1999). On the other hand, academics have shown that mental accounts have also some pitfalls. For example, some significant factors that negatively affect peoples’ tendency to maintain savings are: a) the flexibility of account boundaries that permits people to find loopholes and bypass the self-control imposed by mental accounts (Cheema & Soman, 2006) and b) the number of goals, supporting that a single goal leads to higher savings rates than the multiple goals (Soman & Zhao, 2011).
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More specifically, according to Soman and Cheema (2011), guilt plays a significant role as a factor that contributes to the maintenance of people’s savings. These authors prove that people spend less of their paycheck when there are affixed pictures of their children outside of their savings envelopes. This happens because the affixed pictures constitute a stimulus that makes people feel guilt to use money that is assigned for their children. As an extension of existing research, the current experiments show that except for guilt, responsibility and long-term thinking influence people’s behavior and discourage them from using their savings. Thus, people resort to costly borrowing patterns to finance their emergencies.
Issues Raised from the Research and Possible Solutions
It seems that the authors dispute the efficacy of the interventions that use public and private financial institutions in order to encourage savings among low- and moderate-income households. More specifically, while the existing savings programs are based on the idea that increasing savings will limit people’s borrowing behavior, the current research proves something different. It shows people’s reluctance to draw down their savings even if they maintain accounts labeled for emergency situation (Sussman & O’Brien, 2016). So, it is created a vicious circle. For this reason, the authors suggest that the policies,
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