The Psychology Of Saving and How You Can Beat The System

There’s no doubt about it, saving money can be hard work.

According to ME Bank, around 48% of us Aussies have less than $10,000 in savings (including savings accounts, term deposits and offset accounts). That includes fewer than 21% that have less than $1,000 in savings.

But why is it so difficult for us to save? Is there science behind saving? Can we reprogram our brains to spend less cash? In this Blog we are going to take a look at:

  • Why saving isn’t something we are naturally good at.
  • How the banks exploit this behaviour.
  • How to know if you’re a saver or a spender.
  • 5 hacks to override your subconscious brain and start saving.

The Psychology of Saving – why we’re wired to be bad at it

Interestingly, the amount of money you make doesn’t impact whether you’re a spender or a saver. Instead, according to Dr Ted Klontz, an Associate Professor of Practice and Financial Psychology at Creighton University in the US, and Director of the Financial Psychology Institute®, our innate ability to save or spend can be traced back to when we livied in tribes.

Since tribes operated communally, keeping something you didn’t currently need made you look selfish — and could risk you eventually getting kicked out. Which prevented you passing on your DNA. Similarly, if you saved your food from one day to the next, you could get sick and die (no handy refrigerated cooling those days). Which, again, tended to get in the way of you procreating.

Even 100 years ago, humans were more communal, with several generations pooling resources under the same roof. We also only lived into our 40s, meaning we didn’t need to worry about a long retirement without an income.

This may go a long way to explaining why the majority of us are just not genetically wired to save our cash for that rainy day.

How the banks exploit this behaviour

Banks and credit card companies are well aware of our behaviours and the reasons behind them. Indeed, their business models thrive on that knowledge.

The advent of credit cards has been a real game changer. When older generations didn’t have money, they couldn’t buy anything. But today, if you want it’s easy enough to put it on plastic, ignoring the interest rates – some of which are higher than 20%.

“They’re making money off you spending more than you have,” Klontz says.

Not only that, but they are also making money off us every time we make a mistake. According to, 64% of us paid at least one credit card late fee in 2020. By 2018 Australian banks were making $4.5 billion in fees each year – and Mozo revealed that Aussie households are paying nearly $500 a year in bank fees.

So, what are you? A saver or a spender?

According to a recent study by Xero of 1,000 respondents, here’s what savers and spenders look like:


  1. More likely to budget and keep track of expenses and spending habits (87%)
  2. Key financial goals are on financial management such as retirement, having an emergency fund and paying off mortgages
  3. Feel worried if they don’t have enough savings (95%)
  4. More likely to be married with no children and live in metro areas; and
  5. More likely to be paid monthly.


  • Unwilling to give up luxuries that come with saving (77%)
  • Believe lifestyle is more important than planning for the future (56%)
  • More likely to use their income to pay off debts like credit card bills (30%)
  • More likely to have children under the age of 18 and live in regional areas; and
  • More likely to be paid weekly.

It’s time to fight back, 5 hacks to start saving!

Ready to combat both your brain and the big banks to finally start saving?

Before you do that, you should know that your subconscious brain makes 90% of your decisions without you realizing it, according to Klontz. And that part of the brain, he says, hasn’t “received a programming update for 100,000 years.”

So, to reprogram your subconscious brain, you’ll need to speak its language. Your subconscious brain doesn’t respond to logic or charts, it’ll only respond to fear and pleasure. That means you need to scare or excite your subconscious brain into submission.

Check out this blog for more information.

Here are five ways to override your subconscious brain using pleasure and pain.

  1. Use your senses

Have you ever used a chart to track your goals or a vision board to help you focus your attention? As it turns out, those visual depictions are very effective.

“Your subconscious brain doesn’t get abstract concepts,” explained Klontz. “It’s very literal — like a 6- or 7-year-old.”

What this means is that any effort to change our subconscious has to be sensory and go beyond words.

The more you can see, touch, hear, smell, and taste your goal, the more likely you are to pursue it, said Klontz. That’s because each new sensory experience reminds your subconscious why you’re saving money in the first place.

So, if you’re saving for a trip to Italy, put an image of the Grand Canal in Venice on your fridge where you can see it every day. Visit a local pasta restaurant. Invite your friends around for homemade pizza. Listen to some moving opera.

Dreaming about that trip to Italy but need to save for some spending money first? Put photos somewhere that you will see them regularly as a constant reminder of your why.

  1. Automate your savings

The best way to rein in our bad savings habit is to take away the temptation to spend money, and by putting your savings on auto-pilot, you’ll relieve your subconscious brain of its decision-making duties.

If you don’t see it, you don’t feel it. Pay yourself first by setting up a direct debit to transfer part of your pay into a savings account as soon as you get it. You can even ask your employer to do this for you. This way, you’re saving without even having to think about it. If you get to the end of the month and you don’t feel completely deprived, you can try increasing it.

  1. Scare yourself

While retirement might seem far away, the sooner you start saving, the better off you’ll be.

To spur yourself into action, think about what would happen if you don’t save a dollar. Our brains are wired to be driven approximately 80% by pain and 20% by pleasure, so think about what might cause you the most pain by picturing the worst-case scenario for the last year of your life. Where are you? Who’s there (and who’s not)? What does it feel or smell like?

It’s probably not a pleasing picture. And by imagining it, you’ll stimulate your subconscious brain into changing its behaviour — especially if you also picture the decisions that led you there.

  1. Find a buddy

Whether you’re trying to lose weight, quit smoking, exercise more, or save money, accountability is a key factor in behaviour change.

Find yourself a money buddy who is also trying to build better financial habits, and then challenge yourself to a savings competition. This triggers the pleasure response, and transforms your current definition of “winning” (expensive car, big house) into something completely different, and ultimately far more satisfying (saving more money).

Friends, family members or spouses make great money buddies when they want you to succeed. The key is to find someone you’re comfortable talking openly with about your finances—the successes and the failures.

Challenge you and your money buddy to a competition that makes saving fun.

  1. Put your values on the line

Name an organisation you truly loathe. Perhaps it’s the campaign fund for a politician you oppose, or an advocacy group for a cause you disagree with.

Whichever organisation it is, give your friend $100 and tell him if you don’t save, say, 10% of your pay cheque this month, he has your permission to donate it to that organisation.

Since Klontz says negative emotions have “twice the motivating effect” as positive ones, this “anti-charity” technique can be powerful.

What are some of the other hacks you have used to trick your brain into saving money?

Other blogs you might be interested in

Are you a SAVER or a SPENDER?

Note: The information in this article is general in nature as it has been prepared without taking account of your objectives, financial situation or needs.

B M Peachey

B M Peachey, has over 15 years of experience investing in property and the stock market, in both New Zealand and Australia. She has a post-graduate degree, with qualifications in Finance and Mortgage Broking and in Accounting and Bookkeeping. She is passionate about ensuring people have access to credible, reliable, and easy to understand information to help them get in control of the life they REALLY want to live.

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    Disclaimer: The information in this article is general in nature as it has been prepared without taking account of your specific objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.