Communicating amounts in terms of commonly used budgeting periods increases intentions to claim government benefits

Abstract

Millions of eligible families did not claim their 2021 expanded child tax credit (CTC), collectively forgoing billions of dollars. To address this problem, many policymakers focused on increasing awareness of the CTC by highlighting that families could receive up to $3,600 a year per child. However, people rarely budget on a yearly basis. We propose that communicating the CTC benefit amount in terms of commonly used budgeting periods (e.g., $300 a month) instead of uncommonly used budgeting periods (e.g., $3,600 a year) could increase interest in claiming the CTC. Two large-scale field experiments ( n = 16 , 696 ) among low-income individuals support this account. Using common (vs. uncommon) budgeting periods to describe CTC benefit amounts increased CTC claiming intentions by 16 to 26%. A third large-scale field experiment ( n = 14 , 178 ) demonstrated that encouraging people to consider different budgeting periods moderated these effects. These results suggest that communicating amounts in terms of common budgeting periods is a simple, cost-effective way to stimulate interest in claiming government benefits.

Feeling comfortable with a mortgage: The impact of framing, financial literacy and advice

“…Student debt enables current consumption and will be repaid in the future from an uncertain posteducation incomeleading to a lack of reference point for the repayments, whereas mortgage debt is repaid immediately from current income and constrains consumption. Research has shown that people can more easily grasp the implications of wealth or debt when they can compare it with regular income (Goldstein et al 2016;Goda et al 2014) or place it in a commonly used budgeting period (De La Rosa et al 2022), or break it into smaller quantities (Basu and Ng 2021;Hershfield et al 2020). We argue that lump sum presentations of home loans are more difficult to compare with regular income and thus will be psychologically larger than repayment streams.…”

“…In our debt and repayment tasks, participants rate the repayment stream that can be readily compared with income as more comfortable than a less-easily-compared lump sum debt. One interpretation is that households treat lump sum debt as "larger" than monthly repayments, possibly because they are less comparable with regular income or with the participants' experience with loan repayments (De La Rosa et al 2022;Goldstein et al 2016). The danger when borrowers use initial repayments to guide choices of loan size is that repayments will change with interest rates.…”