The Psychology Of Saving: How Your Brain Works Against Your Wallet

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Common sense – and most financial experts – suggests that to build wealth, (AKA have money left over at the end of each month, which legend has it, can happen); you need to spend less than you earn. It’s hard to believe that’s the best we as a society can come up with, and yet, here we are.

Sure, anyone over 18 knows what you’re supposed to do: understand monthly income and expenses, create a budget, never go shopping on an empty stomach, do your own mani and pedi and ignore the Kate Spade heels on sale if they’re not in this month’s allowance. The problem is that’s not just a boring way to live, it’s more than a little depressing. But why?

When you think in terms of lack or scarcity, even the best intentions backfire

Just as a new diet can suddenly make you obsess over every kilojoule and crave indulgences you wouldn’t normally want, taking recreational shopping off the table can launch you into the same scarcity mindset.

In their book Scarcity, academics Sendhil Mullainathan and Eldar Shafir explain that feeling restricted and deprived actually changes the way we perceive the world.

Scarcity focuses the mind onto the here and now; if there isn’t enough of something, then I want it here and I want it now! In this mindset we overestimate the joy and benefits of instant gratification and underestimate the value of the long-term goals we so carefully set just hours ago.

It requires mental strength to resist temptation, and yet mental strength is depleted when we’re worrying about scarcity.

The internet is working against us

And thanks to social media and online advertising, we’re constantly reminded of what we’re missing out on. While you may not expect to have Kylie Jenner’s white Ferrari, why shouldn’t you have the $500 sunglasses she’s wearing – which coincidentally have started showing up all over the place online since you Googled them?


So the good news is, it’s not entirely your fault you haven’t squirreled away 20% of each pay cheque into a rainy day saving fund the financial experts recommend. Your brain is working against your pocket.

The even better news is that by understanding a little about the psychology of spending, you can improve your ability to save.

How to improve your ability to save, despite yourself

Think in terms of opportunity cost

Economists refer to the trade-offs we make as opportunity cost. By choosing to do one thing, we also reduce our ability to do something else. For example, scarcity mentality says, “I can’t go out on Friday night because I’m saving money.” But thinking in terms of opportunity cost sounds more like “If I spend $100 on a night out, I can’t put that money towards the trip to Vietnam next year” – you’re making a choice, not missing out. It feels less about what you can’t do or have, and more about priorities.

As naff as it may sound, pasting images of your dream goal around the house and on your screensavers can fortify your decision to save.

Clear your cookies

So why is it Kylie Jenner’s Dior sunnies have started popping up on almost every site you visit? Online behavioural advertising, also called interest-based advertising, is to blame. Basically, when you search something or show an interest online in a website or a product, it’s noted by advertising and data collection companies in the form of a cookie (clearly not the delicious kind) placed on your computer’s browser.

Most sites offer advertising, and the ads you see will be informed by the data on your cookies. We all know that repeated exposure to a product can disproportionately increase its desirability – how else could the popularity of Crocs ever be explained?


Clear them or be hounded by your google search for months.

While you can’t stop all ads on all sites, you can limit the interest-based, creepy advertising that follows your every move. The Digital Advertising Alliance of Canada have created this Opt-Out tool to show you who is currently watching you and trying to make you buy their stuff. Opting out of interest-based advertising on Facebook and regularly clearing your cookies will also help stop your window-shopping from coming back to haunt you.

Make a note

Commit to writing down every single cent you spend. This age-old dieters’ trick actually works for saving, by robbing you of the enjoyment of an impulsive moment. A study by San Francisco State University found that “tracking your spending takes away the emotional, addictive quality “ of the experience. Think deflated balloon.

Associate Professor of Psychology Researcher Dr. Ryan T. Howell says “one way to train your brain is to instil a rule that, any time you spend, you have to write it down… the knowledge that you have to track a buy makes it more difficult to make those spur-of-the-moment purchases.”

Create a second income stream already

Of course, the other thing you can do to increase your savings is earn more money. Side hustles are a great way to do this. The last Uber driver I rode with had some better-than-taxi-driver advice. “You should work on Friday and Saturday nights. Most of the people I pick up are nice and we have a chat and I earn a little money. The best thing is I don’t waste it on going out anymore unless it’s something I really want to do.”

He also told me he recently bought his first investment property.

Get all the info you need about Westpac’s eSaver Savings Account here.

Victoria Nikulin is an editor, and social media and content marketing specialist.

Lead image: Farrah