Educating people about the power of compound interest


James Choi and Cade Massey


Many individuals underestimate how quickly exponential series grow (Eisenstein and Hoch, 2005), which causes them to underestimate the financial benefit of saving early in life. Stango and Zinman (2009) find that individuals who have greater exponential growth bias save less and borrow more. In partnership with a large company, we have conducted a pilot experiment to evaluate the savings effect of educating individuals about the power of compound interest.