Early financial choices are crucial for long-term economic security. However, many college students lack exposure to essential tools and unintentionally prioritize short-term spending over long-term goals. This research investigates whether the Hawthorne effect i.e., the act of being observed influences the observation itself, can help students save money and nudge them toward proactive financial choices.
By conducting a randomized survey experiment with responses from over 600 University of Iowa undergraduates, I tested how four scenarios affected their choices: making decisions privately, being observed by a peer, by an economics professor, or by an artificial intelligence (AI) algorithm. Participants chose between a default annuity or a customized investment option and rated prior beliefs about these observers, among other questions.
The study found that being observed by a professor had the strongest impact: 91% of students in that group chose to customize their investments. In contrast, observation by peers or AI did not significantly improve behavior. This highlights a high level of trust in professors. Utilizing this, I propose three systemic recommendations for the University of Iowa to help bolster decision making: i) Let’s Go Pro: designing a career preparation course offered across all majors, ii) The Coaching Phase: establishing financial literacy as a General Education requirement, and iii) Selecting the Coaches: creating a financial office hours program where students can seek investment guidance from certified faculty experts.