7 Mind Games Preventing You from Saving Money


Americans are lousy at saving money. Like eating vegetables and exercising, saving money is a habit that too many of us don’t follow.

  • Forty-one percent of U.S. households have less than $2,000 in liquid savings (about half a month of the typical household’s income
  • A quarter have less than $400
  • One in three American families have no savings at all

Lack of savings isn’t limited to low or middle-income households

  • One in 10 families with incomes of more than $100,000 per year reported having no savings

Without a financial cushion, unexpected events such as a job loss or hospitalization can force people to come up with an ability to pay in other ways. These include using a credit card, borrowing money, selling something they own, taking a payday loan, pulling money out of a retirement account or selling investments.

For some people, saving more money for an emergency, retirement, college fund or some other long-term goal is about more than having extra dollars to put aside. It can be a mind game that can’t be won.

The good news is that you don’t have to let your mind play tricks on you. Here’s how.

Mind Game #1: “I don’t make enough money to save.”


This simply isn’t true for many of us, especially since the Great Recession has ended.

Household incomes have been increasing and the unemployment rate falling for the past few years, giving more people a chance to save.

Some are doing it. The personal savings rate in the U.S. rose to 5.9 percent of disposable income in March after rising steadily since 2013, and there’s still plenty of room for improvement. The personal savings rate averaged 8.29 percent from 1959 until 2017.

Even higher-income households play this mind game – they think they don’t have enough money to save. The more you earn the bigger your emergency fund should be, but households with $85,000 or more in income have a median of just 40 days of income held in liquid savings.

Most of us have a few dollars each month to save.

Mind Game #2: “I’ll start saving when I earn more.”

We vow to save when income rises to a point where we feel we can afford to do so.

“There’s this belief that money will be more plentiful down the road,” says Adam Grossman, a financial planner and founder of Mayport Wealth Management in Boston. “What we forget is that even though our pay will be higher, our expenses will be too.”

“Unless you hit the lottery or get drafted into the NBA, there’s pretty much no time better than the present to start saving,” Grossman says.

Mind Game #3: “I’m young. I’ve got decades to save.”

Image Source | http://bit.ly/2rfcx46

Image Source | http://bit.ly/2rfcx46

Planning to save “later” is a common obstacle to retirement planning. It can be hard to imagine what will happen decades from now.

“Ironically, saving when you do have those decades in front of you is the most valuable time to see because of the miracle of compounding,” Grossman says. “It’s just hard to wrap our brains around it.”

The value of saving is minimized, he says. “Oh, what’s the point of saving if I can only afford to put 1 percent or 2 percent of my pay into my 401(k) (retirement plan)? I’ll start saving later, after my next raise,” he says of a common scenario (note Mind Game #2).

Putting saving off for just five years, not decades, forces you to save more to reach the same goal.

If you save $405 per month by age 25 at an average annual return of 7 percent, you’ll have $1 million at age 65.

If you wait until you’re 30 to start saving, you’ll need to save $585 per month to reach that same goal.

Mind Game #4: “This one purchase is no big deal.”

Any small purchase you make while you’re trying to save money is the same as a cookie you eat while you’re on a diet. The little things add up, whether it’s calories or cash.

“’This one — meal, pair of shoes, bottle of whiskey, iPhone — is no big deal,’” Grossman says of such thinking. “’It’s just a small thing, so it won’t hurt me.’

We tell ourselves that ‘little’ purchases are no big deal, until we get the credit card bill, and we see $500 or $1,000 or more of these ‘little’ charges.”

Mind Game #5: “Nobody else I know is saving money.”

Image Source | http://bit.ly/2rf4K6r

Image Source | http://bit.ly/2rf4K6r

If this is really true for you, then maybe it’s time to expand your circle of friends. Chances are it isn’t true, and that your friends are saving money.

Money is a taboo subject to some people, and talking about saving can sound like bragging.

Even if your friends won’t tell you they’re saving money, you can see how you compare to others in your demographic.

Pew Trusts reports that Generation X has a median of 14 days of income in liquid assets; Millennials have 16. If you’re in those age groups and have more than two weeks of income saved, you’re doing better than half of your peers.

Mind Game #6: “My friends earn more than I do and want to party.”

Keeping up with the Joneses is something that can plague you at any stage of life. You can either chase it and possibly go into credit card debt, or avoid it as much as you can and save your money.

Having high-income friends with more discretionary income can be demoralizing. Remember the Friends episode about income issues? If you can’t afford to join them every weekend, suggest they take the group’s income disparity into account and go on a cheaper night out.

Spending beyond your means will lead to big money problems down the road. Weekends of partying can lead to years of debt.

Let’s say you rack up your credit card to the tune of $5,000. The APR is 18.9 percent and you make the minimum payment, which is four percent of the balance. You’ll be saddled with that bill for more than 11 years.

Mind Game #7: “Saving money is too difficult.”

Saving money isn’t easy, but it isn’t as difficult as you might think.

Nudges can help. Set up the Acorns app to automatically invest the spare change leftover from each transaction. Jump onboard with your company’s retirement plan by choosing a target-date retirement fund. The portfolio changes automatically as you age. Enroll in a 401(k) plan and increase your savings every time you get a raise.

Whatever your savings goals are, you’re not alone in the fight. Don’t let mind games defeat you before you give yourself a chance to succeed.


Pew Charitable Trusts

Sentier Research

Trading Economics

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Published June 16, 2017 Updated: June 21, 2017
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