Usually mixing money and emotions is considered a bad thing. Whether it's retail therapy or impulse shopping, we don't have a high opinion of feelings-based financial management. But a new study suggests we should give it a try more often, and that its long-term benefits could be huge.
Psychologists at Creighton University just released their Banking Reimagined Savings Study, which looks into the relationship between sentimental attachments and financial literacy. One group of participants sat through a presentation on savings, including information about the effectiveness of compound interest and how to strategize about building savings. A second was asked to bring an object or a photo of an object that meant a lot to the participants.
The second group immersed itself in emotion-based exercises that connected their positive feelings about their objects with the value of setting goals for savings. While the first, control group took the straightforward class to heart and reported increasing their savings by 22 percent over a three-week period, the group which connected savings to emotional states saved three times as much — an increase of 67 percent. The researchers found that continuing that trend could help those participants save more than $10,000 annually.
While the study has a lot of potential for financial planners, you don't have to be a professional to integrate these findings in your own life. The research team recommends linking emotion to savings in your head by asking what makes you value nostalgic items and translating that into your vision of your own future. Keep visual reminders of that connection, and strike while the iron is hot by automating your savings mechanisms. That can be as simple as setting up regular transfers from your checking account to your savings account.
"When we have a clear picture of what we want to save, when we can identify why it matters to us, and when we can experience—on a deep emotional level—how great it will feel to reap the rewards of our efforts, saving more not only becomes possible, it becomes fun," writes lead author Brad Klontz in Psychology Today. He's not wrong. Incentivizing savings can, it turns out, cost nothing but a little time.