The Power of Peer Pressure

Comparing yourself with others may provide a helpful nudge when it comes to saving for retirement or staying healthy.

(Image credit: tetmc)

Is peer pressure a bad thing? Most parents of middle schoolers would surely say yes. But comparing yourself with others may provide a helpful nudge when it comes to some areas of your adult life, such as saving for retirement or staying healthy. And yet, like those fraught relationships in middle school, it's complicated.

Behavioral economists have long relied on peer pressure to achieve public policy goals or to promote good health or financial security. For example, software firm Opower, a unit of Oracle Corp., works with utilities to provide 18 million homes with energy-usage reports that include comparisons with neighbors’ usage. You might see that you used more electricity over the past month than similar homes in your area, as well as how much more that cost you. Since the program began in 2009, customers competing with the Joneses have trimmed energy usage by more than 11 terawatts, representing $1.1 billion in savings, according to Opower.

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Anne Kates Smith
Executive Editor, Kiplinger's Personal Finance

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage,  authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.