Let's be real: Saving money is hard. Whether you are trying to increase the amount you are putting aside or trying to replenish what you’ve already borrowed from your savings, it can often feel like an uphill battle. This is because our brains have a hard time making rational decisions with money. Despite having the best intentions, we are naturally prone to favour our wants of today over our needs in the future.
While it might help for some of us to reframe the act of saving — putting money aside is not cheating your present self, it’s sharing with your future self — many more of us would benefit from more subtle tactics. In fact, what we really need is some ways to trick our brains into acting more rationally. For those who want to increase their short- and long-term savings, but just can’t seem to ever get ahead, here are a few tried and tested tricks, backed by behavioural science, that can help make saving as easy as spending.
1. Make it automatic Set up a regular automated transfer to a savings account. Time it to your pay schedule when you’re less likely to miss the money.
Why it works An automated transfer counteracts one of the key cognitive biases that stop us from moving money to our savings, while exploiting the power of another. One reason we struggle to save is the temporary feeling of loss or pain that comes when we part with our money. By timing the money to move on or near your payday, it’s possible to minimize what psychologists call the “pain of paying.” But by making it automatic, you are leveraging the power of human laziness — that is, our Status Quo Bias. It will take more work to stop the transfer than it will to simply live with it. Once the initial effort of setting up the transfer is complete, the same inertia that made it hard to save will make it just as hard to stop.
2. Give your goal a name When you give your money a name — my vacation, my emergency fund, my retirement — it becomes harder to use it for something else. If your bank doesn’t support sub-accounts, you can open a new savings account and give it a nickname.
Why it works It’s a classic saving trick based on a cognitive bias known as Mental Accounting. We have an irrational tendency to put our money in separate mental buckets based on, among other things, what we think we'll use that money for. Once we've earmarked funds as being for something, our mental accounting kicks in and we’re less likely to touch those funds for anything else. However, there is a potential drawback: For the same reason that money feels spoken for, it can also be easy to forget it can be used in a pinch to avoid a sticky situation. Your vacation savings goal is definitely important, but maybe not as important as paying off a high-interest credit card.
3. Think small (now smaller) When you are thinking about how much you can afford to transfer to your savings, it’s easier to think weekly than monthly. And daily over weekly! You are more likely to commit to plan of saving a few dollars a day than several hundred a month.
Why it works Research suggests we are less sensitive to the fact we might lose some money today, when it is framed as a smaller amount. A field study by scientists at the University of California, Los Angeles showed that four times as many people signed up to save $5 a day than to save $150 a month. This trick can be especially helpful for those who are self-employed, work on-call or part-time or earn income through a series of gigs. But if you need convincing this trick works, you’ve seen it before. It’s used often in sales tactics to reframe car lease payments to seem more affordable: Just $90 a week as opposed to $400 a month (or $23,000 over the life of the lease).
4. Convert your payment habits into savings habits Anytime you eliminate a payment from your life — say you pay off a loan, or move the kids out of daycare — keep up the habit, but move the money to your savings before you get used to the extra cash.
Why this works There has been a lot of research in psychology that shows routines are powerful drivers of our behaviours. When we can find an existing habit, and we can leverage it to drive a new behaviour, that new behaviour is more likely to stick. From a scientific perspective, it is really is as maintaining what you are already doing, just adjusting the outcome. Even if there aren’t any upcoming changes in your budget, you can review services or subscriptions you are paying for that you no longer need or enjoy. You can ask yourself: Would I rather pay $100 a month for cable or transfer that money to my vacation fund?
These are some simple tricks that anyone can employ to make saving as easy as spending. They work because they either counter or exploit our brains’ most irrational impulses. Evree works this way too. You can sign up to use our app to help you save for the goals that matter to you. It's true that saving is hard, but with a little bit of planning ahead, you may find it's easier than you think. Or better yet, doesn’t require thinking at all.