Train Your Brain to Save: How to Hack Your Habits Using Science
Saving money is tough. Our brains seem wired to favor spending over stashing cash away for later. While you can’t rewrite your DNA, you can use behavioral science to hack your habits and build your savings.
Our Brains Are Not Built for Saving
Decades of research reveals subtle ways our minds work against saving:
- We prefer instant gratification over long-term rewards according to a study in the Journal of Marketing Research. When a financial reward was framed as “tomorrow” versus “a year” from now, people were willing to wait over twice as long. This makes spending feel better than saving.
- Our willpower is limited, causing us to forego savings in favor of short-term pleasures. A famous marshmallow study by Walter Mischel published in Psychological Science found 4-year-olds could only wait 3 minutes when tempted.
- We fall victim to choice paralysis according to Hick’s Law. A CreditCards.com survey found 60% of Americans with savings accounts have too many, making it hard to choose and act.
- Optimism bias leads us to underestimate future costs and overspend now rather than save up according to multiple studies.
Essentially our brains are wired to choose spending now over undefined future benefits. How can we overcome this?
3 Science-Backed Tricks to Build Better Savings Habits
- Automate it: Autopay savings transfers utilize system 1 automatic thinking, not effortful system 2 willpower. Check out Current savings pods or Envelope Money, a new startup that we have been tracking.
- Make it tangible: A McKinsey study found visual goal trackers doubled savings rates over 6 months. You can use visual goal trackers like Rocket Money or Wealthfront.
- Make it social: Peer pressure is powerful. Research shows people save more when they are part of a group. Frich is a new app that provides benchmarks from the community and lets you compare. We are also big fans of the Cleo roast mode and hype mode which acts as a fun accountability partner.
While our minds naturally gravitate toward spending, applied behavioral science hacks can rewire our habits and make saving feel effortless. Outsmart yourself by putting these insights to work!