It is hard to save money, because we are wired to prefer to do things that are good for us in the short-term over those that are good for us in the long-term. No matter how much we believe that our future self might want to buy a nice car, send our kids to college, or eat after we retire, there are always shiny things that we would like to buy right now that seem to have a priority over our future.
So, how can we help people to save more money?
A fascinating paper by Leon Tam and Utpal Dholakia in the February, 2014 issue of Psychological Science suggests that people’s beliefs about time may have a big impact on how much they save.
The dominant way that many people (particularly from Western cultures) tend to think about time is as a line. Individuals occupy a point on that line that is the present. Behind them is the past, and ahead of them is the future. Because the future is far away, many approaches to help people save more money are designed to make people feel like the future is nearer to the present than it seems. The idea is that when people realize that they have to help our future selves, they will be more likely to put away money to help them achieve their future goals.
These techniques often fail, however. People recognize that their future selves may need help, but they are also optimistic that they will be making more money in the future and so they will be in a better position to save money later than they are now.
Tam and Dholakia point out that people also think about time in terms of cycles. People know that the days of the week repeat, and that the seasons come each year. When people focus on these cycles, they may realize that their lives don’t change much from cycle to cycle. Consequently, if people don’t save money now, why should they believe that they will be in a different situation the next time this cycle happens? The researchers argue that getting people to focus on the cyclic nature of time may get people to increase the amount they save, because they realize that the future will not be that much different than the present.
In one study, adults between the ages of 19 and 55 were placed in one of three experimental conditions.
One group was told to think about time as a cycle and to recognize that life’s cycles repeat themselves. They were told that if they do not save money now, they are unlikely to be in a different situation the next time this cycle came around.
A second group was told to think about time as a line. Their goal was to save money to put their future selves in a better position to achieve their goals.
A third group got no specific instructions about time.
Then, the participants predicted how much money they would save over the next two weeks. Participants were then contacted after two weeks and stated how much they had saved in that period.
Participants in the control condition predicted they would save $133, and actually saved $81. Those told to think about time as a line did not do much better. They predicted they would save $140, and actually saved $118. The group given instructions to think about time as a cycle did much better. They predicted they would save $233 and they actually saved $216.
Another study by these authors extended the work in two ways. First, participants were either told to think of time as a line or as a cycle. They made predictions both for how much they would save this month and also how much they would save a year from now. Participants told to think of time as a cycle predicted they would save more this month than those who were told to think of time as line. This replicates the previous study. However, those told to think of time as a line predicted they would save more money a year from now than those who were told to think of time as a cycle. That is, participants who thought of time as a line were more optimistic about their future ability to save money than those who thought of time as a cycle.
Finally, everyone was asked questions about their ability to make plans to save money. The participants asked to think about time as a cycle exhibited more confidence in their plan to save money than those asked to think about time as a line.
What does all of this mean?
We are often optimistic about what the future holds. In the future, we believe that we will make more money, be better at resisting temptation; we assume we will eat better and exercise more often. In reality, though, the future is typically much like the present. There are always temptations to spend money, eat too much and skip exercise.
Focusing on the cycles of life helps people to be more realistic that the future will be like the present. Achieving future goals requires acting now.