The BBC News website highlights an interesting experiment which suggests that even cash-poor people can save money if they put a little aside in a separate account every time they get paid.
In the experiment, low-paid construction workers put some of their earnings into one envelope and the balance in another, but the second one was earmarked as ‘savings’ to stop them spending the cash on everyday things.
Then, in a bid to invoke guilt, a picture of their children was attached to the savings envelope, so to get at the money, the workers had to literally rip through the pictures of their sons and daughters. As a consequence, many workers decided to avoid this feeling of guilt and ended up increasing their savings.
As the site points out, this saving through guilt is more than just a theory, as millions of people in the UK set money aside in a separate savings account to stop them spending it. However, as a nation, we are not saving as much as we used to. In fact, for the last couple of years, the UK has saved around four per cent of disposable income, whereas in the 1990s, it was almost 15 per cent.
Now financial technology (fintech) firms are experimenting with the guilt around saving concept and are allowing workers to load an image of their savings goal, such as a dream holiday, onto a savings app. The more they save, the clearer the image becomes but if they withdraw money, the picture starts to disappear.
As one of the founders of such a platform explains, this subtly reinforces the reality of what the individual is doing and can materially influence their behaviour. He added that this is needed, as it would appear that the UK “has lost its saving habit”.