In principle, we all want to save money for a comfortable retirement. It can be difficult, however, to “put your money where your mouth is”, sacrificing present spending in favor of a saving for the future. Researchers recently identified a simple, clever, visual tool to nudge people toward planning for future financial security, and financial institutions are already rolling out its use to help their clients.
The premise underlying the research is that people fail to save adequately for the future in part because they are somewhat disconnected from themselves in the future. It’s as though we think of our future self as a different person. By exploiting virtual reality to approximate one’s future appearance, the connection to one’s future self can be fortified, encouraging more disciplined saving behavior.
This finding comes from a study in which the researchers showed college-age participants a photograph that had been digitally altered to depict their appearance as a 70-year old. The researchers’ intention was to focus participants’ attention on the person who would be depending on the future fruits of today’s saving efforts, namely their “future self”. In one exercise in this study, individuals who viewed a photo of their future self allocated twice as much money to a retirement savings account than a control group who viewed only a photo of their present self. This suggests individuals can be encouraged to plan better for the future by way of a simple visual cue. (As detailed in the published article, the researchers operationalized different versions of their study to rule out alternate explanations for the finding and to consider more general contexts, the results of which support the original conclusions.)