Small decisions can have an outsized impact on investors’ financial future. The very decision to start investing can make the difference between a comfortable retirement and future financial stress. Even after deciding to open an investing account, many investors sit on cash and fail to put their savings to work.

Investing doesn’t have to be complicated. In fact, the availability of low-cost ETFs and intuitive brokerage apps means it has never been easier to get started. And yet the decision to take the first step confronts many investors with a cascade of follow-up decisions: Which account, investment product and asset classes to pick? How to invest for long-term goals versus short-term goals? What happens to the portfolio when life changes? These questions can make a straight-forward plan feel suddenly overwhelming. Perceived complexity can hold investors back, especially once decision paralysis sets in.

At Vanguard, our goal is to make investing more accessible for everyone. Our approach is simple: cut through complexity and focus on what really drives investors’ success, because more choices don’t always lead to better outcomes for clients.

In this article, we share research from our behavioral insights research and outline steps that helped us encourage many thousands of investors on our US platform to move billions of their savings from cash into long term investments¹.

Cash drag: setting off with the handbrake on

As of last year, 37 percent of total wealth in the EU was held in equities and investment funds². Encouragingly, ETFs and funds were the second-most popular way to invest (after pension schemes and life insurances), being held by 13 percent of adults in the EU³.

Meanwhile, cash and deposits still made up an outsized share of total financial wealth of around 30 percent, with households in 13 of the 28 EU states holding the largest portion of their financial assets in cash⁴. While EU and UK households own about the same level of cash and deposits in relation to GDP, US households collectively hold smaller cash reserves relative to equity and investment funds⁵.

Keeping a rainy-day fund is an integral part of good financial planning: between half a month’s to half a year’s-worth of expenses as an emergency buffer can noticeably improve financial wellbeing⁶, but every Euro, Pound or Dollar that is sitting idle ultimately makes it harder for investors to reach their long-term goals. We call this phenomenon “cash drag.” It’s akin to setting off on a journey with the handbrake engaged: the longer it takes us to notice, the smaller the chances of making it to the destination on time. Not only are investors missing out on market returns, but they potentially let inflation wreak havoc on the purchasing power of their cash savings.

Gentle nudges can make a significant difference

When there’s too much information or there are too many choices, it’s easy for investors to tune out or make decisions they later regret. On our US investor platform, we make things simpler by using clear language, putting the most important messages up front, clustering options in a meaningful way, and sharing details only when they’re needed. Through smart nudges and investor-friendly design throughout the user journey, we can help investors make decisions that improve their chances of success without limiting choice. By designing simpler experiences that support better choices, we can help them overcome barriers and move confidently toward their financial goals.

Enter our ACE framework. Built on behavioral design principles, ACE stands for Attentiveness, Commitment and Empathy. The three principles of Attentiveness, Commitment and Empathy provide a guide for the implementation and ethics of behavioral design principles. Attentiveness defines effective investor behavior, comparing investors’ actual portfolios against optimal benchmarks for diversification, risk/return ratios, and financial planning best practices. Commitment uses digital nudges and design features to make the right choice the easy choice, and empathy encourages us to meet investors where they are by addressing real behaviors, challenges, and goals.

Tackling common barriers

The ACE framework can help investors overcome key challenges:

• Present bias means favoring short-term rewards over long-term benefits. Retirement planning tools, visualisations and reminders to invest could help strengthen investors’ commitment to their own financial goals.
• Inertia and decision paralysis are often caused by choice overload. We use pre-selected suggestions, automation and timely prompts to simplify decisions.
• Financial education should be as simple as possible and delivered just in time. Helpful knowledge should be offered as the investor requires more information to progress to the next step. Visuals and plain language can further aid understanding of the options presented.

Real-life outcomes

A case study illustrates the effectiveness of this approach: In a 2024 whitepaper, we found that nearly 30 percent of US investors on our platform who had transferred their retirement savings from one account type to another stayed in cash-like investments (the default of the new account type)–not just temporarily, but for at least seven years. When surveyed, most individuals–including experienced investors–suggested they had done so unintentionally⁷. After implementing the ACE framework, we observed how nudges to raise awareness and encourage action helped 100,000 individuals on Vanguard’s US investment platform move $6.2 billion (€5.4 billion) from cash into investments⁸.

Reminders to invest as money typically becomes available —as well as promoting automated ETF savings plans—meant that, by mid-2025, contributions into so-called Individual Retirement Accounts via ETF savings plans on our US platform had already surpassed the prior year’s contributions ($324 million/€280 million).

Across all accounts on our US platform, we’ve reduced complexity. For example, we make it clear that deposited cash isn’t automatically invested—a common misconception. We also encourage investors to define their financial goals and present users with a curated set of investing options first, with the ability to see the full list of possible choices later. By minimizing confusion, decision paralysis and inertia, the Vanguard platform in the US saw a $91 million (€79 million) increase in long-term investments within only 30 days.

Simplifying choices to empower confident investing

While different countries and markets provide a unique context for investors, the successful deployment of behavioral design principles suggest financial service providers across the world can nudge investors into action and help improve outcomes with intentional design choices.

For a more detailed overview of the ACE framework’s mechanics and effectiveness, tune into our upcoming live webinar on behavioral design and nudging.

Sources:

¹  X Xu et al., Vanguard, Principles for behavioral design: Nudging for better investor outcomes, September 2025.

^2,4 Eurostat, Households - statistics on financial assets and liabilities, October 2025.

^3,5 Vanguard based on data of the Financial Conduct Authority (2022), ECB (2021) and Federal Reserve (2022), Core components of a successful retail investment system, July 2025.

Sources:

³ X Xu et al., Vanguard, Principles for behavioral design: Nudging for better investor outcomes, September 2025.

^3,4 Eurostat, Households - statistics on financial assets and liabilities, October 2025. 

^3,5 Vanguard based on data of the Financial Conduct Authority (2022), ECB (2021) and Federal Reserve (2022), Core components of a successful retail investment system, July 2025. 

⁶ Vanguard, Vanguard's guide to financial wellness, March 2025.

⁷ Vanguard, Improving retirement outcomes by default: The case for an IRA QDIA, July 2024.

⁸ Vanguard, Principles for behavioral design: Nudging for better investor outcomes, September 2025.