Wanna save? Keep it simple

Sep 26, 2011

If one savings goal is a good thing, two or more should be great, right?

Not really. Those who want to save are more apt to keep socking money away and more of it too, if they have just one goal in mind, shows work done in multiple countries by two researchers at the University of Toronto's Rotman School of Management.

"If you have only one goal it puts you in a more action-oriented and helps you save more," says Min Zhao, an assistant professor of marketing who co-authored the study with marketing professor Dilip Soman. "Too much thinking about which goal is more important keeps people from acting."

The study looked at a range of different research subjects, including modest in rural India, middle-income Canadian dads, and working professionals living in Hong Kong.

Results consistently showed that a single savings goal worked better than multiple goals. Individual studies also found single goals worked particularly well when it was harder to save. Having multiple goals resulted in people thinking about trade-offs between goals, rather than focusing on implementing their savings plan.

The findings suggest that financial or savings advisors may want to take a different tack with their clients. Banks sometimes advertise a list of reasons to save, but such a message could "backfire" says the study, because that introduces multiple goals, leading to eventual failure in clients' plans.

"The most common mistake is to emphasize numerous reasons to save," says Prof. Zhao. "They should revise their approach."

Of course most of us have more than one thing we need to save for, such as , a child's education and funds for a rainy day. In that case, Prof. Zhao suggests finding a way to integrate seemingly competing goals into a single more abstract goal, such as achieving financial independence or .

Explore further: Economist probes the high cost of health care

More information: www.rotman.utoronto.ca/facbios… l%20march%202011.pdf

add to favorites email to friend print save as pdf

Related Stories

Americans need to save paycheck-to-paycheck

Aug 21, 2008

Americans are better at saving money when they set goals in the near future -- such as next month -- rather than the more distant future, according to a new study by researchers at Rice University and Old Dominion University. ...

How do consumers revise their unreachable goals?

Aug 10, 2011

Most consumers spend their lives setting -- and revising -- goals. Authors of a new study in the Journal of Consumer Research have unveiled a new model that captures the dynamics of goal revision.

Recommended for you

Economist probes the high cost of health care

Mar 27, 2015

When Zack Cooper arrived at Yale as assistant professor of public health and economics, he gained access to a first-of-its-kind dataset. Working with the non-profit Health Care Cost Institute, Cooper and ...

Cash remains king in Chile but its days could be numbered

Mar 26, 2015

For more than a year now, Chileans have endured a crisis of cash access. Despite global moves toward new forms of payment such as contactless and mobile transfers, the crisis in Chile highlights the continuing ...

Will you ever pay off your student loan?

Mar 25, 2015

Would-be participants of higher education must be given full and transparent advice before they accumulate debts as students that follow them into the workplace, according to a report published in the International Journal of ...

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.