We Americans are notoriously bad at saving money. While people in Germany, Sweden and even France save about 10 percent of the money they make, folks in the U.S. save closer to 3 or 4 percent of their earnings. With so little money saved, Americans face difficulty absorbing economic shocks like recessions and layoffs, and also find themselves with too little money in the bank when they retire.
What will it take to get Americans to save more money? According to a study in Psychological Science, it will require a shift in our thinking. But to which way of thinking?
We could think about savings as a kind of circle of life:
- The future will be exactly like the present: if you save money now, you will save in the next pay period. If you don’t save money during the present pay cycle, it is likely you won’t save money in the next cycle.
Or we could think about savings as a kind of highway of opportunity:
- The future will be a road that stretches forward and onward from the present. If you save money now, you will be in a much better position in the future, and this better future state forms the basic idea of progress.
Which of these ways of thinking do you think will lead people to save more money? Well that might depend on whether you focus on today’s savings or tomorrow’s. Because when two groups of people were exposed, at random, to one of these two ways of thinking—circular or linear—the folks in a linear mindset did not imagine saving much money today, but expected to more than make up for that with future savings: