Think back to being a kid for a minute: Scrimping and saving every penny from your allowance (or that you found under couch cushions) until you finally had enough to buy a toy or trinket your heart was set on. Obviously, that gets a lot trickier as we grow up and find ourselves saddled with things like bills and debt. However, a recent study is claiming we can pad our bank accounts by unlocking a similarly emotionally-driven mindset when it comes to stashing cash.
Results of “the Sentimental Savings Study” were published in the Journal of Financial Planning. Study authors split subjects into two groups: One was given traditional financial education, which was basically just PowerPoint presentations laying out the expert advice on saving more money. The other group received more psychologically-based sessions.
First, they tapped into the second group’s emotions by having them bring along a sentimental item to their sessions. They were then asked to remember in detail how they got that item and identify their feelings and values attached to it. After that, the group was asked to identify their monetary goals and identify similar feelings toward their motivation to save. They were also encouraged to dig deeper with their financial aspirations. “For example, if a client stated ‘retirement’ as a goal, planners could facilitate emotional engagement by asking the client to expand on what that means with questions such as: ‘So what does retirement mean to you?’ ‘Where do you picture yourself living?’,” the authors explain. In other words, these participants were asked to unpack the “why” behind their goals rather than just follow rules.
According to their results, the participants given the psychological sessions reported a whopping 73 percent increase in their savings. Those given financial education, on the other hand, only saved about 22 percent more than before the study. Go ahead and read those stats again — that is a huge difference in savings! And all because of some simple exercises that helped participants to visualize the potential emotional impact of those savings.
It just goes to show that even if our brains know all of the logical reasons for making certain financial decisions, our hearts will help us actually make them happen.