To Save More Money, Think in Days, Not Years

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By Robert Ferris

Just thinking of a long-term deadline in terms of days instead of years may help you work toward it more effectively, according to new research by a team of psychologists.

Neil Lewis of the University of Michigan and Daphna Oyserman of the University of Southern California ran seven studies analyzing how groups of people reacted to questions about planning for distant future events. They found that people planned to start preparing for a goal four times sooner if the deadline for that goal was expressed in days, rather than months or years.

"When time is sooner, we use tend to more proximal units, such as days. So we wondered if using days as a unit of time would actually make people feel as though now is the time to act, if there would be more urgency or imminence," Oyserman told CNBC.

The findings -- published in the journal Psychological Science -- may be especially relevant during a time when families are failing by a long shot to save for college and even the rich are worried about their retirement savings.

The Research Explained

The team designed questionnaires for groups of people; the number of participants in the studies ranged from around 80 people to more than 300, with nearly equal numbers of men and women, ranging in age from 18 to 73.

Researchers gave participants a future event or goal that has a fixed date, such as their retiring or paying for college. They were asked to write down when they planned to start preparing for those events. For every scenario, the study participants had two write down a future date measured both in years (or months, in one case), and in days. So 30 years becomes 10,957 days, for example.

In the majority of cases, the participants planned to start saving sooner when they were measuring the amount of time they had in days rather than years. "These are not just subtle yet significant effects," Oyserman said. "The effects are quite large."

Oyserman's previous research has dealt with why people don't prepare soon enough for long-term goals, and she thinks the problem is that people have a hard time making the mental connection between their present selves and their future selves.

Oh, There's Plenty of Time (No, There's Not)

It is natural for people to think that a deadline many years away will leave them plenty of time to prepare, and it is also understandable that people tend to prioritize immediate goals and deadlines over distant ones.

But distant goals typically require action in the near future. Saving money, for example, becomes more and more expensive and difficult as time passes, even without accounting for factors such as compounding interest rates. A 40-year-old person trying to save, say $250,000, will have to set aside a much greater portion of every paycheck than someone who began saving for the same amount 10 or 20 years earlier.

"Americans don't under-save because they don't care. They under-save because they don't start soon enough," said Oyserman, who said the researchers were showing a "mental trick you can use on yourself that allows you to start now, which is the biggest problem the average person has."

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