Personal SavingsPeer-Reviewed Research

A Marathon, Not A Sprint

Conditioning certain behaviors is the best way to save money
  • Most Americans don’t save enough money for their goals.
  • Researchers can now predict who will be successful or unsuccessful at accumulating long-term savings.
  • Successful savers incorporate regular incremental savings techniques into their daily routines, as if they are going to the gym.

Saving enough money is key to a comfortable, stress-free life. Yet much as we want a good education for our children or leisurely golden years for ourselves, most Americans don’t save enough for either. The average savings rate in the United States has been less than five percent, and a majority of Americans report trouble saving on a regular basis. Oddly, neither income nor financial knowledge have much to do with better savings habits. Yet some people are good savers and others are not.

What accounts for the difference?

Utpal Dholakia, a professor at Rice Business, along with his co-authors Leona Tam, Sunyee Yoon and Nancy Wong, think they’ve found the answer. In a series of recent studies, they isolated one measurable behavioral trait that accurately predicted an individual’s propensity to save money.

This trait, which they dubbed one's Personal Savings Orientation (PSO), is an individual’s ability to embed a range of savings behaviors – some automatic and routine, some intentional – into daily life. Among these habits: routinely placing a chunk of each paycheck into a savings account, or making frugal choices in petty day–to-day expenditures.

Subjects who scored high on the team’s assessment scale wove more of these behaviors into their daily routines and accumulated sizable savings over time. Subjects who scored low, even if they were financially literate, did not.

Crucial to accurately gauging an individual's PSO was a sound assessment tool. To make sure their measure was robust, the researchers conducted seven experiments to test its efficacy. Then they conducted two more experiments: the first to identify the precise role that PSO plays in translating financial knowledge into accumulated savings, and the second to test if it was possible to help people with low PSO scores raise them.

Various studies have analyzed savings behavior. However, most focus on efforts to achieve specific goals, such as paying for a wedding or funding college. This study was different: it treated savings behavior not as a one-off project, but as an ongoing state of mind that guides an individual's actions consistently over time. In fact, Dholakia and his colleagues likened it to maintaining a healthy lifestyle, much like going to the gym.

It’s an apt analogy. The ability to save, the team found, resembles a muscle that needs constant exercise. The PSO indicator indicates individuals who have this muscle, and work it out with regular, incremental savings behaviors as part of their daily routines. Significantly, this measured approach to saving worked better to produce long-term savings than just saving for targeted objectives. Meanwhile, contrary to popular belief, financial literacy alone had little impact on savings results, especially for the subjects with low PSO scores.

But those with low PSO scores shouldn’t despair. Specific interventions, the researchers found, can beef up the savings muscle. Most important: taking steps to build regular incremental saving practices. Exercised regularly, these routines will produce positive results – even for low PSO types. Saving behaviors, in other words, can be built into habit.

When it comes to savings, it's a marathon, not a sprint. Build up those muscles, Dholakia's team proposes, and jog, slowly but steadily, every day.

Utpal Dholakia is a professor of marketing at Jones Graduate School of Business at Rice University.

To learn more, please see: Dholakia, U., Tam, L., Yoon, S., & Wong, N. (2016). The ant and the grasshopper: Understanding personal saving orientation of consumers. Journal of Consumer Research, 43(1), 134-155.