{"id":13948,"date":"2023-08-17T19:05:48","date_gmt":"2023-08-17T19:05:48","guid":{"rendered":"https:\/\/jboitnott.com\/?p=13948"},"modified":"2023-08-17T19:05:48","modified_gmt":"2023-08-17T19:05:48","slug":"the-psychology-of-saving-money-how-to-train-your-brain-to-save","status":"publish","type":"post","link":"https:\/\/jboitnott.com\/zh\/the-psychology-of-saving-money-how-to-train-your-brain-to-save\/","title":{"rendered":"The Psychology of Saving Money: How to Train Your Brain to\u00a0Save"},"content":{"rendered":"

It\u2019s called the \u201c$100 Bill Challenge.\u201d Mac Gardner, a financial literacy advocate, shows elementary school students a $100 bill<\/a> and asks them how they might use it. Nine students out of ten say they would spend it. This says a lot about the psychology of saving money\u200a\u2014\u200aGardner says that Americans \u201care programmed to consume at an early age.\u201d<\/p>\n

Maybe that\u2019s why it\u2019s so difficult to cut back on those gourmet coffees on the way to work. But that\u2019s also why it\u2019s so difficult to build your bank balance and develop a long-term savings plan.<\/p>\n

Fortunately, the more you understand the psychology of saving money, the easier it will be to develop sound financial habits. As you discover more about your own money mindset, you\u2019ll also learn that there are proven ways to change.<\/p>\n

The Behavioral Science Behind\u00a0Saving<\/h2>\n

Your saving and spending habits are governed by a small constellation of behavioral biases. And like most biases, these unconscious assumptions influence your behavior outside of your own awareness. Here\u2019s just a sampling of what science has to say about your financial fitness.<\/p>\n

Mental Accounting<\/h3>\n

Mental accounting refers to the way you might classify your funds differently based on subjective criteria.<\/p>\n

So for example, you might start a savings fund to pay for a future car. Sounds great, right? But meanwhile, you\u2019re sitting on a mountain of credit card debt<\/a> and making only a little more than the minimum payment each month.<\/p>\n

As far as the psychology of saving money is concerned, you\u2019re spinning your wheels. Your brain is telling you that saving is important, but you\u2019d actually be able to save even more if you ditched your car fund for a while and focused on paying down your high-interest credit card bills.<\/p>\n

Loss Aversion<\/h3>\n

Fear can also play a major role in human behavior. Loss aversion refers to the way that consumers avoid decisions that lead to financial losses.<\/p>\n

How does that apply to savings? It\u2019s simple. The more money you put in your savings account<\/a>, the less money you\u2019ll have to spend each month. Loss aversion tells you to avoid saving so you have more money to work with.<\/p>\n

Basically, loss aversion is the scientific name for financial FOMO\u200a\u2014\u200athe fear of missing out. Your unconscious worry about losing out on a spending opportunity could very well be short-circuiting your spending strategy.<\/p>\n

Understanding Your Money\u00a0Mindset<\/h2>\n

As painful as it sounds, training your brain to save may require some self-examination. You need to understand your personal money mindset to clarify your financial goals<\/a>, then identify behaviors and attitudes that could prove to be barriers to those goals.<\/p>\n

Identify Your Financial Goals and\u00a0Values<\/h3>\n

In the psychology of saving money, you need clear goals in order to stay motivated. If you identify financial goals and values, it can help you stick to your savings plan.<\/p>\n

For instance, you might have personal values such as:<\/p>\n