There’s a New Way to Trick Yourself Into Saving More Money
There’s absolutely nothing sexy about finances. This type of talk usually sheds an unflattering light on massive student debt, uncertain retirement futures, and a terrible job market that does nothing to help the situation.
If saving money were easy, people everywhere would be a lot less stressed, probably retiring when and where they choose. They’d also have more than just $4,400 in their bank accounts. But unfortunately, money problems often dictate major life choices. And even though many are smart enough to understand the importance of saving money, finding a way to do so is a different story.
People need a better solution for saving money. The obstacles standing in their way are only projected to get more difficult as the years trickle on — such as the fact that a four-year college degree could cost more than $205,000 by 2030. Luckily, new data from Capital One and financial psychologist Brad Klontz suggest there might be a solution to our savings problem. And it’s something nearly everyone can start right now.
But first, let’s take a quick look at why saving money is so tough.
America has a savings problem
Again, Americans need to find a way to take control of their financial futures. About 78% of workers live paycheck to paycheck, including some who make six figures or more. What’s worse is more than a quarter of workers admit to saving nothing each month, according to CareerBuilder.
Skyrocketing health care costs have left many at a loss for how to cover out-of-pocket fees or other unexpected medical issues. Household debt reaches over $132,000 on average, so it’s no surprise the majority of Americans have less than $500 in savings.
Those who can relate to any combination of these issues — and that’s most of us — must get a handle on savings before it’s too late. Here’s how to do it right away.
Next: The trick to saving money is easier than you think.
Saving money requires getting emotional
Klontz suggests we use our brains to help motivate and craft an effective savings plan. In the Banking Reimagined Savings Study, he sought to test “whether positive memories tied to sentimental items could be harnessed to improve financial decision-making,” according to Psychology Today.
The good news? The new way to trick yourself into saving more money only requires a simple dose of nostalgia. In this study, those who successfully tapped into positive emotions attached to heartfelt nostalgic items were inclined to save more.
Our emotional brain is a powerful influencer. “The decisions we make around money are very much driven by our emotional brain,” Klontz tells The Cheat Sheet. “For example, we all know we should save for the future. We all know we shouldn’t spend more than we make. … It’s not like more information about what we should do is going to shift that behavior. Those decisions are really being made on that emotional brain level.”
And the numbers don’t lie. Those who could incorporate nostalgic items into financial planning increased their savings by 67% in just three weeks compared to those who did not. What’s more, if this practice is maintained over the course of a year, the change could represent $10,020 in annual savings on average, rather than just $5,838.
Next: Need more proof? Let’s take a look at why this method works so well.
Nostalgia works wonders for saving
The study found consciously connecting positive emotional memories with your values can help strengthen the ability to plan for clear financial goals and give people the confidence they need to make it happen. Here’s why.
The study tested both a control group and a sentimental group. The control group attended a standard financial education lecture complete with savings tips that read very much like a college course for saving.
But the sentimental group was asked to bring an object from their past with significant meaning behind it — such as photos, jewelry, family heirlooms, or hand-painted pictures — and write down feelings associated with it. Rather than focusing on financial education, they were asked to get in touch with their feelings and values associated with the time, whether it be a sense of adventure, safety and security, or family memories. Then, they were told to jot down savings goals, such as growing a college fund or saving for upcoming trips.
This group was able to validate savings efforts in a way that proved personally valuable. In fact, members reported saving a substantially higher percentage of their gross income in just three weeks after their emotional journey.
Next: Read on for Klontz’s key tips and tricks for saving more money using nostalgia.
1. It’s all about a vision
Klontz suggests improving your finances using visual motivators. “Tap into positive emotions relating to your savings goal, whether it’s using a nostalgic item or whether it’s creating a really exciting vision of the reasons why you’re saving.”
The more specific you can be the better the outcome. Then, you can use these specifics to create visual motivators that can help improve your relationship with money. Examples of this can be cutting out magazine clippings and taping them to your computer monitor or saving a picture depicting your goals on your smartphone screensaver where you’re likely to see it multiple times a day.
Next: Personalization is the key to saving.
2. Name it
Financial success also requires personalization. “Don’t have an amorphous savings account,” Klontz says. Words, such as “retirement account” or “savings account,” are too abstract to have any lasting effect on your savings strategies.
Instead, he suggests getting more specific in naming your savings goals. Various savings accounts labeled “Suzy’s college fund” or “2018 summer destination vacation” evoke more effective emotional connections that can help visualize your goals.
Next: How to break the status quo
3. ‘A’ is for automation and action
Klontz tells The Cheat Sheet it’s critical to take action now to capitalize on your motivation and automate savings where you can. “We have a status-quo bias that develops when we need to keep things going the way they’re going, so if you can use that motivation and keep going, that’s where you’re going to see the dramatic results,” he says.
For example, savers can set up a monthly contribution from your checking account to a savings account with high interest for maximum effect. It’s best if this is done at a time when you’re most confident and motivated to save.
Next: See how tying emotional feelings to savings can benefit you more than just financially.
But wait, there’s more good news
Learning how to better save money now could have lasting positive effects on not only your mental health, but your career, as well. Research from the Employee Benefit Research Institute found a large chunk of workers admit to allowing stress about saving for retirement to creep into their work day. Half of these workers believe they would be more productive at work if they didn’t spend valuable time worrying. And millennials worry about money at a much higher rate than baby boomers, which can also affect their ability to advance their careers and accomplish goals they set for their futures.
But reimagining your savings could change all that. Tapping into nostalgia improves the saving behaviors that reap long-term benefits in addition to immediate results. The study found the sentimental item group’s readiness to save tripled. And members reported financial health four times stronger than those in the control group.
Follow Lauren on Twitter @la_hamer.
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