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This week we look at ways to make saving a habit rather than a struggle. We dig a little deeper into the psychology of how to make (and stick to) a habit, so you can start tucking money away without even thinking about it.
How to make saving a habit: 3 psychological tricks that can help you save
Whether you’re trying to start drinking more water or remembering your lunch before leaving for work in the mornings, everybody knows that the best way to make something easier is to make it a habit. After all, you don’t think about brushing your teeth or tying your shoelaces, you just do them. So, how do you make saving a habit? Is it possible to teach yourself to save so well that it becomes something you barely even register doing?
Well, yes. But it takes some effort, according to scientists and psychologists. First of all, forget that 21 day rule… Have you heard that rule of thumb that says if you do something consistently for 21 days it becomes a habit? Well, we read Jeremy Dean’s book Making Habits, Breaking Habits to find out whether that rule of thumb was true and whether we could apply it to saving money. And as we were reading it, we found out something very interesting.
Here’s what he said:
As you might imagine, there was considerable variation in how long habits took to form depending on what people tried to do. People who resolved to drink a glass of water after breakfast were up to maximum automaticity after about 20 days, while those trying to eat a piece of fruit with lunch took at least twice as long to turn it into a habit. The exercise habit proved most tricky with ’50 sit-ups after morning coffee,’ still not a habit after 84 days for one participant. ‘Walking for 10 minutes after breakfast,’ though, was turned into a habit after 50 days for another participant…
What this research suggests is that 21 days to form a habit is probably right, as long as all you want to do is drink a glass of water after breakfast. Anything harder is likely to take longer to become a really strong habit, and, in the case of some activities, much longer.
But what does that mean?
Across the UK, a quarter of UK adults don’t have any savings at all, so that means we can fairly safely say that saving — and especially making saving a habit — isn’t easy. In fact, lots of the time, it can be pretty difficult. But it’s not all doom and gloom. Look at what Jeremy Dean says about the 50 sit-up challenge. For one participant, it took longer than 84 days to become a habit, but it did stick in the end. So in just under 3 months, this participant managed to get into the habit of doing 50 stomach-crunching sit-ups every day. Now, if you had the choice to do 50 sit-ups every morning or tuck a pound or two away, which would you choose? The money? Yep, us too. So, let’s look at some genuine psychological tricks that can help you make saving a habit that you stick to by making saving easy and, dare we say it, fun.
#1: Make a conscious effort to save
A lot of articles that focus on making saving a habit repeat the same information you’d find in any other article about saving. They suggest strategies like walking to work or starting a direct debit of small savings amounts. And, of course, both of those are fantastic ways to save money. But they’re not necessarily fantastic ways to make saving a habit. In particular, automating your savings goes against psychological research into how we form habits.
And here’s why.
Two social psychologists, Wendy Wood and Dennis Rünger, have spent their careers studying and analysing how the brain works in social situations — in particular, how we form habits — have said the following about how our brain forms habits:
Habits strengthen through associative and reward-learning mechanisms that capture the slow, incremental nature of habit formation. With each repetition, small changes occur in the cognitive and neural mechanisms associated with procedural memory.
Which, in plain English, essentially means that you start to form habits when your brain gets positive signals from performing an action repeatedly. The more you do something, the more the positive response you get conditions you into the habit by rewriting the paths in your brain.
Or, in other words, if you have to consciously do something to make it a habit. Things like automated savings, as awesome as they are, aren’t a habit because you don’t actively do them. You’re not in the habit of doing them, they just happen to you.
#2: Don’t set a monetary goal, set a calendar goal
As we learnt earlier in the article, forming habits isn’t about performance-based goals. If that was the case, the participants in the study would have been set a task to do 3,000 sit-ups over the course of 60 days. Instead, they had to do 50 sit-ups a day. And that’s important because it’s the repetition of an act, rather than the end result, which helps you form a habit. It’s the same with saving. If you have a financial goal, then you’ll save as and when you can and prevent yourself from forming a habit. If you tuck some money away, even if it’s just 10p a day, gets your brain firing on all cylinders and starting to lay the foundations of a habit. But that doesn’t mean that you can’t aim towards a financial goal, it just means that if you want to make saving a habit, you need to break it up. In other words, don’t say: ‘I want to save £300 over the next few months’, say ‘I want to save £3 a day for the next three months’. Breaking it down into smaller chunks doesn’t just make it seem more manageable and less of a challenge, but gets your brain into habit-forming mode.
#3: Don’t make saving a chore
If you’ve ever had to drag yourself to the gym or you’ve got a gym membership collecting dust somewhere, you’ll know that if you don’t enjoy something, you’re unlikely to stick with it. And that makes a lot of sense, especially since we discovered that we form habits when our brains reward us for doing something we think of as good. And it’s the same with money. If you’re constantly putting money away rather than doing things you want to do — whether that’s going out for dinner or buying something you’ve had your eye on for a while — you’ll start to resent saving and, likely, break the habit.
If that sounds like you, try the “anti-budget” 80/20 approach to saving.
The 80/20 approach to saving is hugely popular for many reasons: it’s incredibly easy to work out, it doesn’t take a huge commitment and it makes saving fun.
Here’s what you do: every paycheck you get, take 20% and put it into savings. The rest is yours to pay your rent and bills, but also to do whatever you want with. Even if you go on a huge shopping spree, you’ll still have tucked away 20% each month.
Of course, there are two things you need to keep in mind if you’re thinking of doing this:
- 20% is just a guideline. If you can’t afford to save 20% of your paycheck, work out a percentage you can save and tuck that away instead. Even 1% is going to add up if it’s left in your account.
- Because this is a monthly habit, it’s going to take a while to kick in. Remember how we talked about duration being crucial to make saving a habit? Well, you’ll need to do this for for a few months at least to make sure it takes root in your brain. But it’ll be more than worth it when you check your bank account in the new year!
So, there you have it. Three psychological hacks that’ll help you make saving a habit. Do you have a trick or strategy that you use?
- Author The Bamboo Team
- Posted 28 January 2019