Sticking to It

MELBOURNE – Sometimes we know the best thing to do, but fail to do it. New Year’s resolutions are often like that. We make resolutions because we know that it would be better for us to lose weight, or get fit, or spend more time with our children. The problem is that a resolution is generally easier to break than it is to keep. That is why, by the end of January, most people have already abandoned their New Year’s resolutions.

John Stuart Mill, in his classic defense of liberty, argued that each individual is the best judge and guardian of his or her own interests. But recent research suggests that we can use some help.

Dean Karlan, a professor of economics at Yale University, examined ways to help some of the Philippines’ poorest people achieve their goals. He found that, like people everywhere, they had difficulties resisting the temptation to spend what little they had, even when they recognized that it would be better to save for a goal that could make a more substantial difference to their lives.

When given access to banking, they would save a little, but then withdraw it before they reached their goal. But, if offered a savings account that penalized them for withdrawing money before they reached a goal that they themselves had specified, many chose that type of account, even though the interest they earned was no higher than in an account that allowed them to make withdrawals whenever they chose. Using the account that penalized early withdrawals helped them achieve their goals.