Making your New Year resolutions last the distance can be a mind-over-matter affair. We offer money saving tips to beat the brain barriers that can prevent you from sticking with a savings goal.
The end of one year and the dawn of the next often heralds the age-old tradition: New Year resolutions. And no matter whether you’re saving for a first home, some home improvements or just building emergency funds, growing savings could be high on your wish list for 2018.
Trouble is, those good intentions can be hard to keep – but sticking with them can be a whole lot easier when you know the psychological stumbling blocks we all face.
Behavioural science sheds a light on a range of reasons why it can be hard to keep up a savings habit. And it also provides pointers to stay on track with different ways to save money.
We value today more than tomorrow
A major stumbling block for savers can be “present bias”. It’s the way we have a tendency to place more value on what we have today than what we may have further down the track.
Research has shown for instance, that given a choice between receiving $20 today and pocketing $50 in a year’s time, most people will take the $20 now.
In practical terms, this present bias makes it tempting to blow spare cash on something that gives us pleasure today like a big night out with friends or a new outfit, rather than tucking the money into savings. Or as they say, ‘treat yo’ self’.
Make savings automatic
Happily, there are ways to beat present bias.
Research has also found that making savings automatic can see us stick with the habit of saving for longer.
That can make it worth setting up an automatic funds transfer of cash out of your everyday account and into a separate savings account each pay day. That way you won’t be tempted to spend the cash before it hits your savings account.
Take advantage of the ‘fresh start’ effect
If you’ve dipped into savings or failed to make a deposit recently, don’t give up, tap into a fresh start.
It turns out that the start of a new week, month or year – even birthdays and holidays, are important psychological milestones that give us the motivation of a fresh start, and these are the times when we’re likely to tackle goals with renewed determination.
Set a date, maybe the beginning of each month, to review your savings progress. Don’t dwell on past lapses, instead focus on your progress to date and think about how much closer you are to achieving your goal. Stay positive to stay on track.
Find a savings buddy
Just as weight loss can be easier when you buddy up with a fellow dieter, there’s nothing like having a wingman to encourage you to save.
A social experiment in Chile found people who joined a group of likeminded savers deposited money into savings accounts 3.5 times more often and saved almost twice as much than those who attempted to grow savings on their own.
This highlights the value of moral support to help us achieve goals.
Sharing your savings goal with a spouse, partner or even friends and family can be like having a money mentor to keep you on track. Try it out. Join up with your other half or a friend who’s also keen to save, and give each other valuable support to keep your savings goal alive through 2018.
Set clear, achievable goals
Research by Harvard University shows that goal setting is a key motivator but setting specific goals can be the thing that really fires up your motivation. So skip vague goals like “I plan to save more” and drill down to set a far more specific goals like “I want to save $100 each week”.
That said, the same study also found setting goals that are too high can leave us discouraged. Comparison site Finder found two out of five people who failed to keep up with their NY resolutions admitted they had set an unrealistic target.
Ideally, aim for goals you can comfortably keep up for the full year. When it comes to savings, one way to do this is by using our Budget Planner to see how much you can afford to save on a regular basis. Then head over to our online savings calculator to check out how your savings can grow by making regular deposits into a high interest account.
You may also be interested in 5 tips for keeping your budget on track this summer, How to train yourself to be a better saver and Was it easier to save for a house 25 years ago?