(from Yahoo! Finance’s October 12, 2017 article by Brittany Jones-Cooper. See original post here )
Most financial surveys conducted over the past five years agree on one thing— Americans aren’t good at saving money. A new study, however, reveals how nostalgia could help you build a rainy-day fund.
Led by financial psychologist Dr. Brad Klontz, Capital One’s “Banking Reimagined Savings Study” analyzed how sentimental items can be used to improve financial decision-making.
The three-week study split participants up into two groups. The control group was given a financial education presentation, and went home with no emotional engagement. The second group was asked to bring in an item with sentimental value, like a necklace from a grandmother, or a childhood stuffed animal. During this trial, the sentimental group was also given an emotion-based financial presentation, during which they had to participate in exercises revolving around their nostalgic item.
“We did guided imagery and asked participants to remember how the item came into their life and why they valued it so much,” Klontz told Yahoo Finance. “Then in the next phase, we had them identify their top savings goals.”
What Klontz and his team found is that many people have savings goals similar to the values associated with their nostalgic item. For instance, a person who brought in a watch that their grandfather gave them as a high school graduation gift, had a goal to save money for their child’s college — both things are focused on education and family.
Three weeks after the study, researchers conducted follow-up interviews with participants, and the results were eye opening.
The sentimental group went from saving 10% of their annual gross income, to saving 16.7% — a 7 percentage point increase in saving. The sentimental group also showed an increased readiness to save and more confidence in their ability to save more. On the other hand, the control group was saving around 8.5% and after the study they reported saving a little more than 10%, bumping up their savings by just 1.5 percentage points
“People know what they need to do logically,” said Klontz. “But by tapping into this positive emotion and getting really excited about how saving for the future connects to their values, and making that positive connection, really strengthened their desire and motivation to take action.”
If you find yourself struggling to save, here are a few tips from the study that you can incorporate into your financial routine.
Create a vision board
Visual motivators can be a great way to improve your relationship with money.
To make one, simply browse through a magazine and cut out photos and words that depict what you want. You can even draw images if you don’t find what you’re looking for.
The board can show what you’re saving for, what you want, and how it would feel to have it.
Klontz encourages people to place their vision board prominently in their home, to serve as a constant reminder. He even suggests putting it as wallpaper on your desktop or smartphone, so that you see it several times a day. The ultimate goal is to picture yourself enjoying the benefits of reaching your savings goal.
Find your own nostalgic item
Just like the participants in the study, you can also use a sentimental item to reach your savings goals.
Whether it’s a piece of jewelry, a stuffed animal or a photo, look at the item and ask yourself these questions.
- Why did I keep it?
- What feelings are associated with this?
- What values are associated with it?
“Is it tied to the concept of loving or having a supportive family, a sense of adventure?” asked Klontz. “Use the power of emotion tied to that sentimental item, then get specific around what you’re saving for.”
Like your vision board, keeping your nostalgic item visible will serve as a constant reminder to stay positive and take action.
Name and automate accounts
Setting up a monthly automatic contribution from your checking to savings account can be a great way to save more.
In addition to setting up automatic transfers, Klontz also suggests that people give their savings account a name. Most banks let you do this online under the settings tab. So, if you’re saving for a vacation, give the account a specific name like, “2018 Spain Family Vacation.” This will remind you of your savings goal and inspire savings confidence.
If you bank with Capital One 360 or a handful of other online banks, consider setting up a sub account. This is basically a smaller savings account that feeds from a larger account. “Ideally, if you’re identifying three financial goals, we want you to identify three sub accounts,” Klontz said.
With this method, you can contribute more money to specific goals and watch each account grow.