The psychology of saving money - 5 top tips

Because of the way we’ve evolved over time, spending money feels good for most people. We have a natural need to reward ourselves. So resisting the urge to spend can be difficult for most of us.

But psychologists have found that for a smaller number of people, saving money gives them the same good feeling. So, while most people are natural spenders, some are natural savers. Have a think about how this works for you. This will help you get the most out of the following tips.

The way we act tends to reinforce itself, whether it’s a good or a bad behaviour. We’re all creatures of habit. This is why changing the way we do things always feels hard at first, but then gets easier over time.

So if you’re a natural spender trying to save, start small with your saving goals. The sooner you start to see small amounts add up, the sooner you’ll feel good about it. And when this positive feeling comes, it’s likely saving will stick as a new habit.

Practical tip: Create a standing order to a savings account for a small amount each week. It’ll help you make steady progress towards your goal, even when you don’t feel like you can save that month. Start low and you can always increase if you think you can manage more.

If you know that buying new things makes you feel good, you’re probably prone to emotional spending. This is when you buy non-essential items to feel a reward - a feeling of control, a little boost, or a welcome distraction from life. It’s the money equivalent of comfort eating. And you probably won’t know you’re doing it at the time.

Practical tip: Emotional spending is impulsive, so having a plan will reduce the temptation. Set a budget each month for non-essential spending. By doing this you’ll feel much more in control of your money, and the treats may feel more rewarding too.

When thinking about money, humans often fall into the trap of what psychologists call mental accounting. This is the tendency to use different ‘mental bank accounts’ to make spending decisions that aren’t always in our best interests.

Here’s an example. You get a gift of cash for your birthday. Even though you’re saving for a new car, you spend this money on a treat. The gift was unexpected, and, in your head, this was ‘birthday money’ not ‘car money’ so that’s fine. But when you think about it, that wasn’t the best decision.

Practical tip: To avoid mental accounting, you need to know the true patterns of your spending – rather than what you think they are. There are lots of apps and other online services that could help you do this.

From the beginning of time, we’ve been wired to pay more attention to what’s happening now, rather than the future. It’s normal to find it hard to think about what’s around the corner in our everyday lives. Psychologists call this our ‘present bias’.

If you know that saving gives you more satisfaction than spending, you may be less affected by this. But for natural spenders it makes it really easy to put off making future money plans.

Practical tip: The best way to start shifting your focus to the future is to get a handle on your spending today. Then you can begin to get a feel for how much you can save. Setting up a budget for your monthly spending is the best way to get started.

Once you’ve set a target for yourself (whether it’s a savings or a spending goal), tell someone. Making a commitment to do something makes it much more likely to happen. As we’re psychologically programmed to stick to personal pledges, use this to your advantage.

Practical tip: Tell someone close to you about what you’re planning to do and by when, to increase your chances. Even better, if you have a friend or family member with a similar goal, commit to follow your plans together.

While we really hope you find this page helpful, please know it’s for information only and not financial advice. Any facts or figures we’ve used were checked at the time of publication and came from a range of sources.