People who find it hard to save money are often impatient and do not think about the long-term consequences of spending money, suggests a new research.
In the study published in the Journal of Consumer Research, the researchers examined how consumers spend money when they think about the future.
“We have known that being aware of the benefits of not spending and being patient contribute to savings, but our research finds that one or the other is not enough,” said study authors Daniel Bartels and Oleg Urminsky from the University of Chicago Booth School of Business.
For the study, consumers were asked to choose between a more expensive product and a cheaper alternative in six different product categories.
When consumers first ranked the categories by importance (prompting them to consider other uses for their money) and read about their future selves (emphasising that their identity was stable over time), they spent less on the categories they had ranked as least important.
Making consumers think about and value the future did not simply make people stingy. It caused them to spend more wisely — to make better financial decisions by focusing their spending only on what was really important to them.
“For consumers to be motivated to save money, they need to both consider the future financial consequences and care enough about their financial future when spending money,” the researchers noted.