Saving money can feel like an uphill battle for many people. Even when we know that setting aside money for the future is important, whether it’s for an emergency fund, retirement, or a big purchase, many people still find it difficult to save consistently. While this struggle may be a practical problem (not enough income or high living expenses), for others, it often goes deeper than that. The psychology of saving plays a huge role in our financial habits. Let’s look at some of the psychological factors that make saving difficult and how to try to overcome them.
One of the biggest psychological hurdles to saving is the human tendency for instant gratification. When we’re faced with the choice between immediate pleasure and delayed reward, our brains are wired to favour the instant reward. Studies have shown that the brain releases dopamine, the ‘feel-good’ chemical, when we make a purchase or indulge in something pleasurable. This creates a cycle where the short-term satisfaction of spending outweighs the long-term benefits of saving. While saving money for a future goal like buying a house or retirement can seem like a good idea, these rewards feel abstract and distant. The emotional satisfaction of saving isn’t as tangible or immediate as the joy of buying something you want right now.
One way to combat instant gratification is to visualise the end goal of your savings. If you can imagine the feeling of being financially secure, buying your dream home, or retiring early, it may make those long-term goals feel more real and motivating. Additionally, setting smaller, achievable goals can help you experience the satisfaction of reaching milestones, which builds momentum to continue saving.
Many people struggle with saving because they feel like they don’t have enough money to set aside. This often stems from a scarcity mindset, where you believe that you’ll never have enough, so saving seems pointless, and you don’t bother. If you’re constantly worried about making ends meet, it’s hard to think about saving for something that’s far in the future. A scarcity mindset creates a sense of urgency and stress, which can lead to poor financial decisions, like prioritising short-term spending over long-term savings. When you feel like money is tight, it’s difficult to feel confident about saving. Research has shown that when people are in a state of financial scarcity, their decision-making abilities can be impaired. This can lead to more impulsive decisions and a tendency to neglect saving.
Shifting from a scarcity mindset to an abundance mindset can help. Even small savings can help you build a sense of financial security, and over time, you may start to see that you do have the ability to save. Start by automating your savings, even if it’s just a small amount each month, to build the habit and start seeing progress. Building an emergency or rainy day fund can also give you peace of mind and reduce financial stress.
Unlike spending money, which provides instant gratification, saving doesn’t offer a direct reward. This lack of an immediate benefit makes it harder for our brains to prioritise saving over spending. When you save, the reward is often years or decades away, and the process can feel tedious. Without immediate feedback, it’s difficult to stay motivated, especially when the money you’re saving may seem out of reach.
Make your savings journey more tangible and enjoyable by setting up smaller, short-term rewards. For instance, if you’re saving for a special holiday, reward yourself after reaching smaller savings milestones. You could also make your savings more visual by using savings apps that show your progress or by creating a vision board of the things you’re planning on your trip to help you visualise your goals.
We live in a society where spending is often seen as a symbol of success. Social media platforms, advertising, and even our friends and family can influence our decisions to spend rather than save. Sometimes it feels like everyone except you has a new car or an exciting weekend full of plans. The desire to keep up with others, whether it’s buying the latest tech, going on expensive holidays, or maintaining a certain lifestyle, can make saving seem less appealing.
Studies have shown that people often feel compelled to spend money to maintain their social standing or appearance. If everyone around you is spending freely, it can be difficult to resist that pressure, especially if you see it as a way to fit in or gain approval. FOMO (Fear of Missing Out) is a big drawback of the online world. Social media amplifies the feeling of missing out when you see others spending on experiences or items that look desirable. This can lead to impulsive spending, leaving less money to save.
One way to combat this pressure is to redefine your version of success. Instead of focusing on what others have or are doing, think about what you want for your financial future. Set personal goals and celebrate them, rather than measuring success based on others. It may also help to limit exposure to social media or unfollow accounts that promote excessive spending.
Cognitive dissonance occurs when we hold two conflicting beliefs or attitudes, and this conflict creates discomfort. For example, you may want to save money for the future, but you also want to spend money on things that give you pleasure now. This creates inner tension and can make it hard to commit to saving consistently. When you save, you might feel deprived, like you’re missing out on the things you enjoy. But at the same time, you know that saving is important for your future security. This tension can lead to procrastination or avoiding savings altogether.
To resolve this dissonance, focus on balancing your desires. Allocate some of your income for saving, but also allow yourself to spend on things that bring you joy. By creating a budget that includes both savings and spending, you can feel more in control and less conflicted about your financial decisions. You might also want to use the ‘pay yourself first’ method, where you automatically put aside savings before spending on anything else.
Finally, some people avoid saving because they fear making financial mistakes. The complexity of different savings options, such as ISAs, pensions, bonds, and stocks, can be overwhelming, especially when you’re not sure which option is best for your needs. This uncertainty can lead to financial paralysis, where you don’t take action because you’re afraid of choosing the wrong path.
Start small and seek out financial education. The more you learn about personal finance, the more confident you’ll feel in making decisions. There are thousands of easy-to-digest videos and explanations online. You don’t have to become an expert overnight; just start by setting a simple goal, like building an emergency fund, and then expand from there. Additionally, if you’re unsure, consider seeking advice from a financial planner or advisor.
Saving money is not just a financial challenge, it’s a psychological one. The emotional and cognitive factors that influence our financial decisions can often undermine our best intentions to save. By understanding the psychology of saving and recognising the mental barriers we face, we can take steps to overcome them and develop healthier financial habits. Whether it’s shifting our mindset, setting tangible goals, or seeking out education, small changes in how we approach saving can have a big impact on our financial futures.
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