Savings rates are alarmingly low in both the U.S. and globally, with the Bureau of Economic Analysis reporting in October 2022 that Americans are only saving 2.3% of their income – the lowest rate in nearly 20 years. Despite expressing a desire to save more, people find it challenging to do so, partly due to the psychological barrier of sacrificing current desires for future benefits.
To explore potential solutions to this problem, Sandra Matz, PhD, from Columbia University, and her colleagues Joe Gladstone, PhD, from the University of Colorado at Boulder, and Robert Farrokhnia, PhD, from Columbia University, conducted research to investigate if connecting savings goals with individual personality traits could make saving more manageable.
The journal American Psychologist published the study’s findings.
According to previous research conducted by Matz and Gladstone, individuals with high levels of agreeableness tend to save less than others, potentially due to the belief that valuing money conflicts with valuing people. They may also associate being financially focused with negative connotations, as “nice people” are not expected to prioritize money.
“We tried to think of ways we could motivate agreeable people to save more,” adds said. “Could we simply highlight how saving money would help them protect their loved ones? This suddenly makes money a means to an end that they care about.”
More broadly, she and her colleagues proposed that certain objectives could be more compatible with persons who possess particular personality qualities than others. For instance, a conscientious individual may be more inclined to make plans for the future and so be more motivated to save money for retirement.
With the use of a survey and a field experiment, Matz and her colleague tested the theory. Initially, they looked at information from 2,447 people in the UK who responded to questions on their financial objectives and their Big Five personality characteristics (agreeableness, conscientiousness, neuroticism, openness, and extraversion).
The savings objectives were independently categorized into groups based on how well they matched the personality attributes.
Saving for a future purchase, such as a vehicle, saving for leisure and vacation expenses, saving for a “rainy day,” and preparing for retirement were among the objectives.
Overall, the researchers discovered that individuals with larger average nest eggs were those whose self-reported savings intentions closely matched their personality features. Both the poorer and the richer individuals had the same impact.
It should come as no surprise that individuals with higher incomes saved more money on average, but personality-goal fit explained just 5% of the variation in savings amounts across all income levels.
The experiment was then carried out with 6,056 individuals who were all enrolled in a savings incentive program through the non-profit savings app SaverLife. The aim for the study’s participants, who had less than $100 in savings before they began the program, was to save at least $100 more in a single month.
After each participant completed a 30-item personality test, the researchers separated the participants into five groups. One group got five emails during the month urging participants to put money aside for a goal that complemented their most noticeable personality attribute.
A third group got randomly chosen goal messages, a fourth group received emails with a general message urging saving but no specific goal, and a fifth group received no emails at all. Another group received emails with goals that were inappropriate for their personality type.
The personality-matched condition had the best success rate, with 11.4% of individuals achieving the $100 savings target, although not all participants read the emails, according to the study.
Compared to that, 7.42% of people in the standard message group, 7.46% of people in the random message group, and 7.85% of people in the personality-mismatched group responded positively. In the no-email control condition, just 3.4% of participants reached their savings target. A 3% success rate was seen by participants who were in the email groups but didn’t check their emails.
Gladstone found that participants in the personality-tailored intervention were 3.57 times more likely than those in the control condition to reach their $100 savings goal.
“It was wonderful to see this approach worked,” remarks Farrokhnia.
The authors of the study emphasized the need to not only add to the current body of research but also to apply their findings to practical use in the real world. Their aim was to provide companies with actionable insights that could be implemented.
With the alarming statistics regarding savings in the United States, the researchers were particularly motivated to assist low-income and distressed households in overcoming financial obstacles.
“The recent economic downturn, including rising prices and higher challenges around achieving personal savings goals, made this pursuit even more important to us.”
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