One Crucial Thing You Are Not Doing to Boost Your Savings During Unprecedented Times
When it comes to savings, it’s always the more the better. Or is it? As it turns out there is a more effective way of saving that actually works better if people put in less money at a time. This unexpected method also looks at saving in terms of daily goals instead of the more common monthly goals that’s been recommended by financial experts for years. Read on to find out how one can use this saving technique to their advantage.
According to a study done by researchers from the University of California, Los Angeles and the University of London, people are up to four times more likely to start building their savings if they go about doing it by setting aside $5 daily instead of a lump sum of $150 monthly. Although these two methods end with the same amounts, Shlomo Benatzi, Stephen Shu, and Hal Hershfield found that people’s willingness to do the former is due to their impression that $5 is more manageable to achieve. They said that it can be more ‘painful’ to let go of a relatively larger amount like $150 compared to just $5. Another interesting finding is that promoting saving using these ‘granular terms’ decreased the participation gap between those who earn more and those who earn less.
Simplifying Things More
And to make things even easier and simpler, experts also recommend people to turn to apps like Acorns, Digit and Albert to help them in their quest to save whether it’s for an emergency fund or a major financial goal. Digit and Albert particularly focus on liquid savings and even work to study a user’s spending habits. These apps can also transfer money from one’s checking account to a savings account automatically making saving almost an unconscious activity. The same can be done without the use of an app by automating transfers through one’s bank.
This finding would certainly encourage more people to start saving or even investing. However, it’s also important to learn to pace oneself and not get too ambitious right away. Before automating monthly savings transfers, take the time to observe how much one spends regularly in a month first. Doing so would prevent a person from overdrafting from their checking accounts when they start saving.
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