The psychology of saving

Instead of saving, we're spending money like there's no tomorrow. In the UK, between 2000-2002, the average amount of household income saved had fallen to 5.9 per cent from an average of 9 per cent between 1990-1999.

Before now psychologists have examined differences between people who plan to save and those who don't. They haven't looked at whether those intending to save actually do. Now Anna Rabinovich and Paul Webley have done just that.

The researchers used data collected over several years as part of the the Dutch DNB Household Survey. This included 1360 people who said they planned to save over the next two years and did, and 89 people who also said they planned to save over that time period, but failed.

The successful savers differed from the failed savers in what the researchers called their 'time horizon' – that is, the time they said was most important to them tended to be further in the future.

The successful savers also used effective techniques to control their spending, such as setting up an automatic transfer of funds into a savings account every month. This and other techniques used by the successful savers all had one thing in common – they made the saving process partly automatic and so less dependent on willpower. By contrast, the failed savers used ineffective techniques like keeping only small amounts of cash on them when they went out.

The researchers also predicted that people who thought saving would be easy, would turn out to be more successful at saving (they assumed their confidence stemmed from having good self-control), but actually, perceived easiness of saving was not related to saving success or failure.

To test the generalisability of their findings to people from a developing country, the researchers also looked at data from 153 people sampled in Belarus, and found broadly similar results.
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Rabinovich, A. & Webley, P. (2007). Filling the gap between planning and doing: Psychological factors involved in the successful implementation of saving intention. Journal of Economic Psychology, 28, 444-461.

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