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6 Features I’d Add To The Financial Industry3 min read

Algorithms To Live By

Jul 11, 2018 - Max Osbon ( 5 mins to read)

Max Osbon

In 2013 Google’s New York office ran an experiment that replaced the normal glass M&M containers with opaque containers labeled “M&Ms.” Within seven weeks the 2,000 person office’s consumption of M&M’s had dropped by over 3.1 million calories. Without changing our willpower or discipline, we can control our healthy habits with simple changes to our environment. We should be able to do the same with our financial health by making small tweaks to our financial environment. Here are six M&M/Google-inspired features I would add to our financial lives:

The goal of each of these features is to create an effortless and subconscious change in our financial behaviors for the benefit of our financial health.

1. IF / THEN statements on my checking, savings and credit card accounts

IF / THEN statements are a great framework for creating your own cause and effect feedback loops. Shorter, more frequent loops tend to build stronger habits.

  • IF my account balance hits a certain level, THEN automatically buy a small predetermined gift for me from my Amazon wishlist
  • IF I deposit more than $1000 to my savings account in one transaction, THEN text me a celebration gif
  • IF my monthly credit card balance exceeds $4500, THEN send me a disapproving look

2. Parental controls on your teenager’s credit card

Credit cards with low limits for your teenagers will help build credit and protect from fraudulent transactions. *Debit cards don’t build credit and have no fraud protection*. It would be nice if there were robust parental controls on those cards, such as:

  • Block McDonalds as a repeat merchant
  • Allocate $500 for the campus bookstore merchant account
  • Quickly approve one-off expenditures in real time from an app on your phone
  • The credit card stops working for 30 minutes after each use

3. Matching: Like 401k matching but for family accounts

Most people sign up for 401k’s to get the matching benefit from their employer. We should be able to set up the same incentive process with family accounts to teach saving habits early on.

  • Parents automatically match 10% to 100% of contributions to their kid’s savings account or investment account. A notification goes to all parties involved when the transaction is complete.

4.Local and personal leaderboards

How do your habits compare to others, or to yourself?

  • You spent $5000 more on travel this month than the average Chase customer in Boston
  • You saved $100 more this month than over the same period last year
  • You use your card for twice as many transactions as the average user

You have paid your balance in full for 39 consecutive months

5. Hide an account

Like the M&Ms experiment, out of sight is out of mind.

  • “Hide” a particular account with a nominal recurring deposit, say $50/month. Tell it to notify you of the balance in 18 months. Like finding $20 in your winter jacket pocket, it will be a very pleasant, effortless surprise.

6. Reinforce the balance between saving/investing and spending

A group of entrepreneur friends from Australia taught me their abundance mindset rule when it comes to saving, spending and investing. It’s very simple: alternate your spending and saving/investing habits so that you’re certain to always build for the future while enjoying your hard earned capital.

  • Access a simple dashboard with one side that shows cumulative savings and investing activity and the other that shows spending activity.
  • Set targets like 2 to 1 ratio savings to spending for the month of September

Gamification (w/ Seth Priebatsch)

Local Bostonian payments star, friend, and founder of LevelUp Seth Priebatsch has a great TED talk on gamification, how game mechanics shape the world. There are some startups trying to tackle the above and with increased competition, we can expect them to make the financial world more customizable and interesting. The ultimate benefit, of course, will be better spending and savings habits. How would you change your financial world?

 

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