How simply talking about money can help you save
Sticking to your savings goals can be difficult and it’s often easy to fall behind target due to a desire to spend – it happens to everyone. To some, the idea of talking about money to a loved one or close friend is a difficult and stressful idea. Often, these conversations carry a degree of emotion so people choose to either avoid these conversations entirely, or wait until a serious situation comes up.
However, for those who want to save more or are struggling to save, conversation might be the answer you’re looking for.
Research conducted by Stephen Meier, Senior Scholar at Columbia Business School, alongside a number of Chilean professors and experts, found that talking about money can actually help you to save. The study was divided into two experiments:
In the first, individuals were divided into 196 peer groups that met weekly to discuss savings goals. They would set public savings goals and their progress was monitored by the group. Those who achieved their goals were recognised with a reward. There was also another set of individuals (a control group) that were set the same goals and offered a higher interest rate, but they did not meet at all.
Astonishingly, those who participated in the group meetings deposited 3.7 times more often than the group that did not. They were also found to have twice the savings balance when compared to the control group. Those who participated in the group study also claimed to be significantly less anxious about their financial future.
In the second experiment, individuals were assigned a “Savings Buddy.” They then kept each other updated on their savings goal via regular feedback and follow up communications, such as a text. The researchers found that holding people accountable through regular feedback and follow-up text messages also yielded increased savings, though not quite as high as the in-person peer group meetings.
“As it turns out, just talking about savings each week basically doubles the amount that people actually save.”
You can check out a summary of the study here.
You can download the full paper here.
What does this mean for you?
For many individuals out there, it is doubtful that they will meet up for a peer group savings meeting on a weekly basis. However, the fact that study shows that even communicating and checking in with one another to discuss your saving progress can be enough to improve your savings strategy.
Talking about money
As we mentioned above, talking about money can be seen as taboo by some. However it doesn’t have to be. You may have seen the recent Lloyds Bank campaign surrounding the ‘M word,’ they even published a survey in March 2019 around the subject. Being supportive of your loved ones when it comes to money can help to break the taboo and improve your saving ability. The Money Advice Service has an excellent guide on how to prepare yourself for a conversation about money, especially when the individual might find it difficult to have the conversation.
The important thing is to get a conversation going. That might be with your loved ones, friends or your financial adviser. As we saw in the study, keeping up momentum, finding support and supporting others to save can yield dividends when it comes to saving.
For more information on how to develop a robust savings plan, don’t hesitate to get in contact.