Short-Term vs. Long-Term Savings

In a recent post, Are You Saving Too Much? I noted that we’re all familiar with the idea of finding balance. Ideally, you are currently living life to the fullest and have an adequate plan in place to ensure your future is financially secure. If you are saving more than you need in that future, you are not spending money today that could be spent on activities that bring you pleasure. A new study from MotivIndex indicates that saving too much for the future doesn’t appear to be the problem for many.

I’m sure that doesn’t come as a surprise to most of the readers here.

According to Digital Motivation ResearchTM from MotivIndex, the pioneer of an innovative new research method that analyzes people without influence or observational bias, 4 out of 5 individuals (80 percent) do not believe in delayed gratification when it comes to saving, yet that is the message given to most of them through various financial education programs.

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Using a team of PhD Sociologists, MotivIndex studied the beliefs of over 4,500 Americans and found that the people who are less likely to save for retirement actually felt alienated and turned off when a financial institution tells them to “change” their behavior and/or think “long term.” In fact, the findings showed that these consumers are actually compelled to lie when asked about their financial intentions and plans as they are emotionally unwilling to change their spending habits.

Nearly half of the non-saving population (40 percent) also believes that spending money and taking on debt is okay as long as it’s done with the welfare of others in mind and justifies spending decisions based on the belief that it benefits others in their family or circle of friends. These individuals have a vision for how their life is supposed to be, so they do everything in their power to achieve it. Whether it involves investing in organized sports for their children, buying a bigger more expensive home, upgrading their cars, or even rewarding their loved ones with expensive dinners and experiences, this cohort ignores logic for the emotional satisfaction of doing something that benefits others.

Each year, consumers are asked about their saving intentions and they consistently claim they will save more money, invest it better, and spend less frivolously. Using data culled from antiquated research methods, financial institutions launch literacy programs, new saving devices and marketing campaigns to educate people about retirement etc., yet people’s saving habits never change.

“By analyzing the unspoken motivations of consumers, we were able to discover that traditional education methods were ineffective, as consumers considered the messages used by financial institutions to be more like finger wagging,” said Jason Partridge, Co-Founder of MotivIndex. “To truly resonate with individuals, the financial community should start with programs that provides individuals with a reason to save short term by connecting it to important events in their lives. The bottom line is that financial institutions must build trust before trying to get people to think about the future.”

About MotivIndex
MotivIndex Inc. is the pioneer of Digital Motivation Research – rapid turnaround, high-quality, market research services. With its proprietary methodology and revolutionary approach of revealing unspoken motivations through the digital observation of consumers and voters, MotivIndex is disrupting the way companies and politicians uncover opportunities that drive real value. Using a team of PhD Sociologists and Political Scientists to analyze millions of publicly available conversations, MotivIndex deconstructs the lives of thousands of people, without influencing them through observation bias or interrupting them with questions and group think. For more information visit www.motivindex.com, follow their co-founders on Twitter @Interpretivist, @copywrestler, connect on LinkedIn, or call (416) 823-3326.

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

9 Comments

  1. It’s interesting to see the statistics. I absolutely agree with Elle, we are all so good at rationalising our spending.
    My husband is terrible at delayed gratification – he would just rather have something immediately than save and wait for it. I’m working on him!

  2. Hi James,

    Great post, thank you for sharing what you have researched and learned from MotivIndex’s findings.

    It is plain common sense that in order to save, you gotta spend less than what you earn. This common sense applies for both short-term and long-term goals. I understood this simple truth when I was in deep debt.

    I had to change my lifestyle and spending behavior to turn my financial life around.

    When it comes to money, behavior management is key. People need to make the choice to manage themselves or find someone they can trust to manage / guide them. Being in denial of this truth is a recipe for a financial disaster.

    –Michael

    • “When it comes to money, behavior management is key.” Indeed. Like you, I had to change my spending behaviors to gain financial freedom. Thanks for stopping by, my friend and sharing your thoughts.

  3. Fantastic article – I definitely enjoy your writing style: engaging and well researched. As you share, it is ultimately a mind game. Saving isn’t necessarily hard, it just requires us to prioritize everything. What has really helped me was one of the first concepts I ever learned in Economics class — opportunity cost. When I look at the opportunity cost of every purchase (what I’m giving up) it makes many of my purchases no longer worthwhile. Keep up the great blogging!

    • Indeed. Opportunity cost. An important concept that is often not understood or appreciated by too many individuals in our hyper-consumer society.

      Thanks for dropping by, my friend and sharing your thoughts.

  4. There is so much psychology behind why people make the choices they do. We may have the knowledge, the education, the statistics that tell us what the smart choices are, but those can be overcome by so many things. Hurt, sadness, fear can impact our decision-making as much as joy and excitement. Any financial decision made during an extreme emotion may be tainted by our state of mind.

    In the end, we are all only human, doing the best we can from day to day.

    • Great points, Cathy. I believe the operative word in your comment is ’emotion.’ Most people know what they should be doing, or at least have a pretty good idea of the things they shouldn’t be doing, but yet, often make poor decisions because of inability to delay gratification and because they respond emotionally under pressure. You are absolutely correct that we are only human and often doing the best we can day to day. The good news is that as we grow older – and hopefully wiser – we are able to recognize when an emotional response may trip us up and act more logically.

      Thanks for taking the time to stop by and share your thoughts.

  5. Interesting point!

    Goes to show that people can rationalize anything. We can rationalize our spending habits, our borrowing habits, anything.
    Whatever makes us feel good about ourselves will do.

    • You are absolutely right. In my mind there is no doubt that financial success is less about the application of technical guidelines (e.g. having a perfectly diversified portfolio) and more about controlling emotions and harnessing the ability to delay gratification.

      Thanks for stopping by, my friend and sharing your thoughts.

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