Why It Is So Hard To Save Money

July 31, 2018

© Iodrakon | Dreamstime

According to the Federal Reserve, the average working-age couple only saved $5,000 for retirement in 2016 and it may be our brain's fault! A new study suggests people unconsciously think more about making money than they think about saving it, because we tend to think we have more time to save than we do. An experiment found that our minds have a bias towards earning that is so powerful that is warps our view of time. And this isn’t the first study to show that our brains have further biases in relation to how we perceive saving money. A research study from the National Bureau of Economic Research found that 55% of those surveyed had present-biased preference in which they chose the immediate gratification of spending money over thinking ahead and saving it. Although the researchers say there are other factors such as age, financial security or personality type that could affect how people prioritize how much they save versus how much they earn, there’s a misplaced emphasis on earning for Americans across the board. For the majority of Americans who don’t prioritize savings, this bias shows that it’s not about people not working enough, we're just not saving. In fact, despite the high employment rate at 96% in the United States, the savings rate fell at around 3% for individuals across income brackets at the end of 2017, according to the U.S. Bureau of Economic Analysis. The solution to remedy this bad habit is not to save more, but to retrain the brain to start seeing saving opportunities. Researchers suggest re-training your brain by saving a dollar a day, not necessarily to build your savings account or to gain interest, but to bring awareness to the act of saving.

SOURCE: Moneyish

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