The Psychology of Saving Money – Five Things You Can Do

Humans are terrible at saving money. Why? There are many societal and economical factors. Keep reading to learn about the psychology of saving and spending.
The Psychology of Saving Money – Five Things You Can Do
Valeria Sabater

Written and verified by the psychologist Valeria Sabater.

Last update: 15 November, 2021

Believe it or not, people are terrible when it comes to saving money. According to recent statistics , nearly one-third of Americans (31 percent) have less than $5,000 saved for retirement. Unfortunately, nearly half (40 percent) couldn’t cover a $400 emergency without borrowing money or selling something.

Of course, many people already heard scary stats like these before. You may already know we humans are terrible at saving money. Why, though? For starters, there’s a myriad of societal and economical factors . For example, low wages, higher costs of living, insane student loans, and so on. 

However, what’s the real root cause of our inability to save? How can we fight our natural tendencies to finally start investing in our future? According to expert psychologists, here’s the intriguing psychology of saving and spending. Most importantly, clever saving tips to help you get ahead with your finances.

Why humans are so bad at saving money

Firstly, “it all goes back to when we were living in tribes, ” says Ted Klontz. Klontz is a brilliant financial psychologist and professor at Creighton University. All tribes operated communally. Keeping something you didn’t currently need to be made you look selfish. In other words, this could eventually make them kick you out. 

Furthermore, if you saved your food from one day to the next, it was also problematic. For instance, you could get sick and die. Even a mere century ago, humans were highly communal, with several generations pooling resources under the same roof. 

People sadly only lived into their 40s. In other words, they didn’t need to worry about surviving multiple decades without working. Klontz further notes that a small portion of humans are natural savers, only between 14 percent and 17 percent. Therefore, it’s plain to see why the rest of us simply aren’t wired that way.

Saving money – how financial institutions exploit us

Unfortunately, traditional banks and credit card companies are well aware of the statistics. In fact, their business models thrive on that knowledge. Klontz says that credit cards, in particular, created an “artificial bottom”. In other words, when older generations didn’t have any money, they couldn’t buy anything. Today, you can surely put it on plastic. 

When you do, the issuing bank will charge you an interest rate, one as high as 22 percent. “They’re making money off you spending more than you have,” Klontz says. Likewise, financial institutions also charge exorbitant fees for making small mistakes. Essentially, profiting off your sheer human-ness. 

Of course, there are some banks that don’t charge fees. According to Chime’s Bank Fee Finder, there was something intriguing. The average American household pays $329 in bank fees annually. Sadly, in 2016, the big banks earned $33 billion in overdraft fees alone.

Five clever tips to finally start saving money

The following clever tips will surely help you start saving money. Are you ready to fight both your brain and the big banks to finally start saving? Before you do that, there’s something important you need to know. According to Klontz, your subconscious brain makes 90 percent of your decisions without you realizing it. 

That part of the brain, he adds, didn’t “receive a programming update for 100,000 years”. Consequently, to properly bypass your subconscious brain , try something vital. For instance, to speak its language. It won’t respond to logic or equations or charts. Even so, it’ll only respond to fear and pleasure. That’s right. Literally, you need to scare or excite your subconscious brain into submission. Here are five ways to do so.

Tip one – use all five of your senses

Did your third-grade teacher hang a goal chart in your classroom? For example, a “good behavior thermometer” or a lovely poster that showed how close you were to reaching your reading goals. When you reached the top, you had a fun pizza party. As it turns out, those visual depictions are very effective. “Your subconscious brain doesn’t understand abstract concepts,” explains Klontz.

“Hence, it’s very literal, like that of a six or seven years old. Any work to change the subconscious has to be sensory. Similarly, it has to go beyond words,” he says. If you’re saving for a trip to Peru, there are many things you can do. For instance, sketch a picture of Machu Picchu or listen to some Peruvian flutes. Why not visit a famous local ceviche restaurant?

Lastly, you could tell your co-workers the myriad reasons you’re dying to visit. The more you see, touch, hear, smell, and taste your goal, the more likely you’ll pursue it, says Klontz. Each new sensory experience reminds your subconscious why you’re saving money in the first place.

Tip two – scare yourself

Surely, today, retirement seems far far away. However, the sooner you start saving money, the better off you’ll be. Are you ready to spur yourself right into action? Consider thinking about what would happen if you didn’t save a dime. Picture the worst-case scenario for the last three weeks of your life. Where are you and what does it smell like? Who’s there (and who isn’t)? 

Although it’s probably not a pretty picture, by imagining it, you’ll stimulate your subconscious brain into changing its behavior. Especially if you also picture the decisions that led you there. Taking it a step further, Klontz recommends using age-progression software. For example, the free and innovative AgingBooth app.

Luckily, this app is available for both iOS and Android. “When you take a 30- or 40-year-old person and show them what they’re going to look like at 70 or 80, savings increase. Believe it or not, the rate increases dramatically up to 200 percent.”

Tip three – automate your savings

Did you know that another clever way to trick your brain is to, well, not really involve it all? Simply by turning your savings on auto-pilot, you’ll relax. This way, you’ll relieve your subconscious brain of its decision-making duties. “If you don’t see it, you don’t feel it,” says Kathleen Burns Kingsbury. Kathleen is a savings psychology expert and author of the genius book Breaking Money Silence

Recent research shows that it’s beneficial for employers to automatically enroll their workers. For example, in retirement plans, forcing them to opt-out, rather than sign up. This idea significantly boosts participation rates. Similarly, we found this with Chime customers, too. People who enrolled in both of the automatic savings programs save more. Nevertheless, an average of 240 percent more than those who aren’t enrolled in either.

Tip four – find a buddy

Are you trying to quit smoking, exercise more, or save more money? In fact, accountability is a key factor in behavior change. Thereupon, Kingsbury suggests finding a friend who’s also trying to build better financial habits. Additionally, consider challenging them to a saving money contest. Whoever saves the most by the end of a certain period will be crowned the winner. 

This strategy transforms society’s crazy current definition of “winning”. For instance, a flashy car or a bigger house. This new definition of winning is a more fiscally responsible one, saving more money. Experts also say the most effective rewards are intrinsic. In other words, enjoying the feeling of saving money, rather than rewarding yourself with something tangible.

Tip five – put your values on the line

Firstly, name an organization you truly loathe. Perhaps it’s the campaign fund for a politician you oppose. For instance, an advocacy group for a cause you disagree with. Whichever organization it is, sit down and write a $100 check to it. Secondly, give that check to one of your trusted friends and give them a message. Tell them that, if you don’t save money, they have utter permission to mail it. 

For example, ten percent of your paycheck this month. However, if you don’t have a checkbook, you can use a new app like stickK. Klontz says negative emotions have “twice the motivating effect” as positive ones. Luckily, this “anti-charity” technique can be highly powerful.

To sum it up, today’s the best day to start saving money, even if you can blame your struggles to save on your internal software. You can’t use your brain as an excuse forever. It’s never too late for a fresh start. Thus, use the tips above to circumnavigate your subconscious. Most importantly, set yourself up for future financial success. We hope to learn about the psychology of saving and spending. What exactly are you saving money for?

All cited sources were thoroughly reviewed by our team to ensure their quality, reliability, currency, and validity. The bibliography of this article was considered reliable and of academic or scientific accuracy.

  • Gil, Suarez. Adriana, Feliu, Joel (2009) Psicología económica y del comportamiento del consumidor. Barcelona: Editorial Uoc

This text is provided for informational purposes only and does not replace consultation with a professional. If in doubt, consult your specialist.