In Episode Four of Mind Over Money with Nigel Latta, we learned more about how the brain can sabotage simple things like our ability to save.
Why do we find saving so hard? Good news and bad news – it’s not about your lack of self-control, however it is about your brain’s inability to work in your own best interests.
We’re programmed to think of saving as a “loss” and on top of that we heavily discount the future over the needs of the present. So if you have stuff you want right now, your comfort in retirement falls off the radar pretty quickly.
As the show pointed out, saving is not only boring, it can actually make us feel unhappy. It can feel like money going into a big hole, never to be seen again. Perhaps a better word than ‘saving’ is ‘spend later’ money. Savings are there to help us get the life that we want.
So what can we do to help ourselves?
1. Change your mindset
Tweaking your behaviour starts with becoming aware of what’s really going on. So first acknowledge that your brain might be working against you. Try to think of savings as spending on things that’ll make us happier, just a bit later.
2. Little and often
People think saving requires a heroic tightening of your budget, but like dieting, overcommitting to a massive (and unrealistic) goal can actually end up making us feel worse, and giving up entirely. In reality, little and often is the way to get there. Kiwibank has developed a tool called Help Me Save which tallies all the money you’d have in the bank if you saved instead of spending across a whole lot of everyday items.
3. Make it automatic
We’re also happier if we never see the money we save, so one of the most valuable tools to help is the automatic payment. Kiwibank’s PayStream splits your income into different pots – so your saving will be happening without you realising it.
4. Have a goal
Choosing a goal you get excited about also helps. If you do have a goal for the money and want to stay focused on the end game, enlist the help of Kiwibank’s Goal Tracker. Goal Tracker gets you to name your goal and monitors your progress to keep you motivated.
5. Set up a separate place for your savings, and then don’t touch it.
Choose a savings account that works for you, whether that’s one with a higher interest rate or one with bonus interest if you don’t withdraw. You can also hide it from yourself in various ways to remove temptation – for example, with Kiwibank’s internet banking, you can go into “Settings”, and manage which accounts you want to not automatically see under “Hidden accounts”.
Finally, to help us overcome our ‘head in the sand’ approach to money, Kiwibank has a Roadmap to Independence. It’s a step by step online guide for those who want to generally get on top of their relationship with money, or have a specific goal like saving for a first home, travelling, paying off a mortgage, saving for a wedding or saving for something in the future.
See Nigel explain Take the experiment
