The Refund to Savings (R2S) Initiative is the largest saving experiment conducted in the United States to date. R2S is a collaboration of academic researchers and tax industry experts from the Center for Social Development at Washington University in St. Louis, Duke University, and Intuit Inc., the maker of TurboTax tax preparation software. R2S builds a saving-promotion experiment into the TurboTax Free File Online product that is available free to low- and moderate-income households.
R2S experiments measure the effect of behavioral economics techniques using a randomized controlled trial with the goal of increasing savings at tax time. The tax refund is the largest check most households receive all year, and because it is outside of normal budgets and income, it may present a golden moment to increase families’ financial security.
The low saving rate in American households has placed people across the income distribution at risk of financial insecurity. About 41 percent of U.S. households do not have enough liquid funds to come up with $2,000 in the case of a sudden drop income or rise in expenses. For lower income households, that number rises to 78 percent.
Low rates of savings has drawn the attention of the policy community. In response, policymakers have considered expanding support for financial literacy education, increasing access to saving vehicles, and using tax incentives to promote saving. However, the evidence on these programs is mixed. This has led some scholars and policy analysts to draw on lessons from behavioral economics to design defaults and frameworks that could encourage individuals to save more of their incomes. The research activities of R2S gives unique and timely evidence on the dynamics of saving among low- and moderate-income households and demonstrates how interventions informed by behavioral economics can stimulate saving.