The psychology of saving and starting a positive savings habit
August 2024
The psychology of saving and starting a positive savings habit
August 2024
Have you ever wondered why you spend – or save – the way you do?
You might be surprised to know that there’s actually a little bit of science behind it. Of course, what we do with our money can be influenced by lots of different things. Our own personal financial situation, whether we were exposed to budgeting tactics growing up, or even our understanding of how finances really work, can all have an impact on our ability to save. And we can’t forget about wider economic events like the cost of living crisis, that also play a part.
But our ability and willingness to save for the future can also be down to psychology. Are you someone who likes to splash the cash the minute pay day rolls around or do you relish being able to put money aside every month? Below, we’ve explored the theory around ‘financial psychology’ and have shared some steps you can take to improve your money management skills.
Understanding triggers: the psychology of spending
One of the best ways to improve your ability to save is understanding what triggers you to spend.
There are lots of different psychological influences which can encourage us to part with our hard-earned cash. These include:
- The Bandwagon effect – doing something because others are doing it
- Nudge theory – when we’re influenced to choose one option over another
- Anchor bias – when we favour the first item we see and buy it even if a better deal is available elsewhere
- Retail therapy – when we spend our money to cheer ourselves up
Our spending is often closely connected to our emotions. There’s nothing wrong with occasional impulse purchases - after all, treating ourselves is part of enjoying life! But recognising these triggers can help you to take a more balanced approach to spending and saving.
Set sunny goals and track your spending
Too often, we think of saving as making sacrifices, whether that’s giving up our morning coffee or cutting down on meals out. The psychological impact of giving up something you love can make saving difficult.
But you don’t simply have to save for a ‘rainy day.’ While it’s important to make sure you’re covered for an emergency, it’s worthwhile saving for a ‘sunny day’ too. According to our recent Save for your Sunny Days report, as many as 91% of us aren't prioritising saving for some of the things that make us truly happy.1 Put money aside for a summer holiday, a weekend away or a festival with friends – it can be encouraging to save towards something you’re bound to enjoy. This way it won’t feel like a chore and can help put you on the path to building a disciplined saving habit.
It’s also important to track your spending. To get a better idea of where your money is going, sitting down and looking back at your spending over the past few months can help you to see where savings can be made. There are financial apps available, such as the Coventry Building Society App, which can allow you to easily view where your money is going each month and identify any unnecessary spending you no longer really need.
Celebrate the small wins
Setting clear, achievable goals will give you direction and purpose to saving. This can help you break down larger financial aspirations into more manageable steps.
Remember to reward yourself when you hit your targets. Celebrating your financial wins with your family and friends, whether it’s treating yourself to a nice meal, a trip to the cinema or a day out, can help you to stay motivated to stick to your savings plan.
At Coventry Building Society, we’re committed to helping people build healthy savings habits. That’s why our Regular Saver allows you to build up a useful savings pot by setting aside up to £500 a month for 12 months at a variable interest rate. Our Young Saver account also comes with other rewards for savers between 7-17 years old when they reach specific savings milestones, such as stickers and stationery.
Train your brain
Related articles:
How can your savings have a lasting impact?
Find out how your money can contribute to something purposeful.
Have you ever wondered why you spend – or save – the way you do?
You might be surprised to know that there’s actually a little bit of science behind it. Of course, what we do with our money can be influenced by lots of different things. Our own personal financial situation, whether we were exposed to budgeting tactics growing up, or even our understanding of how finances really work, can all have an impact on our ability to save. And we can’t forget about wider economic events like the cost of living crisis, that also play a part.
But our ability and willingness to save for the future can also be down to psychology. Are you someone who likes to splash the cash the minute pay day rolls around or do you relish being able to put money aside every month? Below, we’ve explored the theory around ‘financial psychology’ and have shared some steps you can take to improve your money management skills.
Understanding triggers: the psychology of spending
One of the best ways to improve your ability to save is understanding what triggers you to spend.
There are lots of different psychological influences which can encourage us to part with our hard-earned cash. These include:
- The Bandwagon effect – doing something because others are doing it
- Nudge theory – when we’re influenced to choose one option over another
- Anchor bias – when we favour the first item we see and buy it even if a better deal is available elsewhere
- Retail therapy – when we spend our money to cheer ourselves up
Our spending is often closely connected to our emotions. There’s nothing wrong with occasional impulse purchases - after all, treating ourselves is part of enjoying life! But recognising these triggers can help you to take a more balanced approach to spending and saving.
Celebrate the small wins
There are proven psychological benefits to being a regular saver, no matter how much you can afford to set aside each month. Did you know, doing this could help you feel more optimistic, sleep a little better and improve your ability to relax?2
Setting clear, achievable goals will give you direction and purpose to saving. This can help you break down larger financial aspirations into more manageable steps.
Remember to reward yourself when you hit your targets. Celebrating your financial wins with your family and friends, whether it’s treating yourself to a nice meal, a trip to the cinema or a day out, can help you to stay motivated to stick to your savings plan.
At Coventry Building Society, we’re committed to helping people build healthy savings habits. That’s why our Regular Saver allows you to build up a useful savings pot by setting aside up to £500 a month for 12 months at a variable interest rate. Our Young Saver account also comes with other rewards for savers between 7-17 years old when they reach specific savings milestones, such as stickers and stationery.
Train your brain
Related articles:
Planning ahead for a lower interest rate environment
What do you need to think about when interest rates start to drop?
Related articles:
How can your savings have a lasting impact?
Find out how your money can contribute to something purposeful.
