Could sentimental items help you save more money?
“By incorporating personal nostalgia and savings experiences into financial planning—workshops, money coaching conversations, or even self-directed processes—it may be possible to successfully harness a person’s positive emotions related to their past to facilitate healthier financial decision-making.”
—Brad Klontz, “Getting Sentimental Could Increase Your Savings,” PsychologyToday.com, 10/12/17
A new study led by psychologist Brad Klontz tried to figure out if sentimental items—like Grandpa’s old watch or your childhood stuffed toy—could change savings behaviors. This might sound like wishful thinking, but considering how many of our financial actions are driven by feelings (ever gone on a shopping spree after a breakup?) and how irrational we can be about money, Klontz and his team at Creighton University thought they might be on to something.
It turns out that they were. The results of their Banking Reimagined Savings Study, with support from Capital One, were dramatic. Klontz and his team split participants into two different groups—a control group, which was given a standard financial education presentation, and an experimental group, which was directed to bring a nostalgic item to a similar presentation. After sharing the positive feelings they associated with the items, these participants were asked to name their emotions and discuss how they relate to their individual savings goals.
Over the course of a year, the emotion-driven savers would sock away $4,182 more than the control-group savers. With compound interest and a 7% return, that’s nearly $62,000 in extra savings after 10 years.
Three weeks later, researchers surveyed both groups’ savings rates. The emotion-driven experimental group had increased their savings significantly—by a whopping 67%! Compare that to the control group, which responded to their less-inspiring presentation with a much smaller 22% increase in saving. Klontz’s theory: The emotional exercises helped participants understand, at a gut level, how saving money helps them achieve meaningful goals.
Klontz estimated that, over the course of a year, the emotion-driven savers would sock away $4,182 more than the control-group savers. With compound interest and a 7% return, that’s nearly $62,000 in extra savings after 10 years.
It’s no surprise that when it comes to money, people respond with emotion. A famous 2000 MIT study (one of my favorites) showed that we spend less when we use cash than when we use plastic. This is because we feel more—in this case, negative feelings—when we hand over paper bills. That’s why I’m a big proponent of spending with cash, especially for young people. Paying electronically is so abstract that we don’t experience that same “pain of paying,” which can make us more cavalier with our purchases. Thanks to Klontz’s research, we now know that positive feelings can also lead us toward better financial behavior.
I always say that what makes personal finance so fascinating is that first word: personal. And this study backs that up. Next time you need some motivation to contribute to your emergency fund, take out those ’92 vacation photos or good ol’ Teddy and think about why they’re meaningful. Do they make you happy about that time your college roommates all saved up enough to go to Yosemite? Or thankful for Mom’s love when she got you your favorite toy for your birthday?
“Now ask yourself what kind of feelings and values are associated with that item,” Klontz writes. “Chances are, these feelings and values tap into some of what matters most to you, and underlie many of your current savings goals.”
Those good vibes could be just the inspiration you need to save for a better future.