Reprinted with permission from Freedom Beyond Wealth
Let’s be realistic-saving money sucks! Honestly, doesn’t it feel great to get your paycheck and spend it on whatever your heart desires? From clothes, food, cars, technology…we’re sure there’s so many other things you would rather do with your money than having it gather dust in a bank account. Unfortunately, as unappealing as it is-saving money is an essential habit that everyone should actively enjoy doing! So, if you’re not and/or hate saving money maybe it’s time to reevaluate how you view saving?
3 Types of Saving Mindsets
The University of Michigan Center on Assets, Education, & Inclusion (AEDI) published a report discussing children’s savings accounts. In their publication the AEDI referenced a 1997 study that suggested that there are three different savings mindsets individuals generally exhibit depending on their income levels.
|Income Level||Saving Mindset||Examples|
|Low||Survival Based||Daily Needs (food, clothing, etc)|
|High||Growth Based||Interest-bearing accounts|
As the chart above illustrates those with low incomes view saving as survival based. Those with mid incomes view saving as security based; and finally those with high incomes view saving as growth based.
What Does this Mean?
Sticking to a Savings Plan
We can draw a few conclusions from these findings. Firstly, how you view saving can affect your likelihood in successfully sticking to a savings plan. For example, the survival and security mindsets highlight fear-based saving mentalities. In other words, if you don’t save (for those rainy days) something horrible could happen. Like having to work in your twilight years because you didn’t have enough for retirement. Or going without a vehicle because you needed auto repairs. Yikes!
As you can imagine this type of thinking does not make saving enjoyable but rather a burdensome obligation which if not done regularly could result in potentially dire consequences. Fear-based saving inspired regimens makes savings plans feel like a sacrifice thus reducing the chances of successful completion. Compare that to the growth based mindset which practically turns saving into a game of how much money can you grow in a given period of time!
Selecting Savings Vehicles
That actually brings us to our second point that your saving mindset may determine the type of savings vehicles you select. Those with the growth mindset are more likely to select savings options that yield higher interest rates compared to traditional savings accounts offered by banking institutions. This makes vehicles like the stock market, peer-to-peer lending, real estate or other types of investing more lucrative and appealing to members of the growth mindset than those with a survival or security based mindset who may look at those tools as risky.
What’s Your Saving Mindset?
Despite public opinion, saving money (regardless of income status) is a difficult task. Saving money requires a level of commitment, willpower, and confidence-traits we typically attribute to individuals like bodybuilders or other professional athletes. However, by simply understanding how you view saving you can develop better savings goals and habits that will allow you to truly prepare for those…rainy days!