If you're having trouble saving money, it might be because you have too many savings accounts.
That might sound counterintuitive, but it's the conclusion of a study conducted recently by researchers at the University of Utah and the University of Kansas. They found that individuals with a single savings account wound up saving more than those who had multiple accounts.
"Utilizing work on motivated reasoning and fuzzy-trace theory, we suggest that multiple accounts engender fuzzy gist representations, making it easier for people to generate justifications to support their desired spending decisions," the researchers write in the abstract for the paper, which appears in the May 2013 edition of Organizational Behavior and Human Decision Process. "However, a single account reduces the latitude for distortion and hinders generation of justifications to support desirable spending decisions."
If that sounded like gibberish to you, author Promothesh Chatterjee puts in simpler language in a press release from the University of Kansas' business school.
"Basically, people look for an excuse to spend, and vague information facilitates this," he explains. "And having multiple accounts provides just enough vagueness to do the trick."
Or to put it another way: If you've got four different accounts open, it might be easy to convince yourself that you've got a bunch in savings. If you have all of your savings in one account, it's easy to see exactly how much -- or how little -- you have.
So does that mean you have to consolidate all of your accounts so that you can get realistic about your finances? Well, not necessarily. As Chatterjee points out, there are plenty of personal finance tools that can make your savings picture less "fuzzy."
"You can at least try to reduce the vagueness of having money across multiple accounts by utilizing software and services that provide a consolidated view of all of your accounts in one place," he suggests.
Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.
Old-School Money Tricks That Still Work
Want to Save More? Have Fewer Savings Accounts
With the various incentives to use credit and debit cards, cash can often seem like an afterthought. After all, obtaining, tracking, and toting it can seem more hassle than it's worth. But if credit-card swiping is turning into mindless spending with month-end statement shock, it might be time to switch from plastic back to paper.
A once-weekly withdrawal from a no-fee ATM can help keep spending on everything from incidentals to luxury items in check. Want to take it up a notch? Try budgeting and paying cash for purchases larger than the daily latte: groceries, gas, mass transit tickets, or an evening out.
Bank of America offers its customers the chance to Keep the Change. The premise is simple. For every purchase a customer makes with his or her debit card, Bank of America will round up to the nearest dollar, and deposit the difference into your savings account. The bank will even match the difference for the first three months, up to $250. The catch? B of A charges a $12 monthly maintenance fee for customers who don't use direct deposit or maintain a $1,500 minimum balance.
The old-school alternative? A mason jar and a daily ritual of emptying pockets and purses of any loose change left over after paying for items with cash.
There's something inherently charming about the old Holiday Club and Vacation Club accounts. They call to mind days when every $5 received in a birthday card was squirreled away; when banks still gave out toasters, and lined their counters with jars of lollipops.
It might sound quaint, but the discipline works. Socking away a few dollars a week over the course of several months to help fund a vacation or holiday shopping adds up. The cash out at the end of the term is like winning the lottery -- one lump sum comprised of tiny, barely noticeable amounts throughout the year.
Previous generations knew their banker by name, knew his or her children's names; they swapped stories, were part of the same community. While it's temping and convenient to complete most banking transactions online or rush in and out of a branch when needed, what's lost is a personal connection that email alerts and social-media posts simply can't replace.
There are tangible benefits to getting to know local branch staff. Having a face-to-face connection with bank staff can be helpful in resolving charge disputes, being kept abreast of rate changes, and getting information on specially tailored products.
Before the days of the large international bank, most people had their financial needs met at the corner savings and loan. If big banking has lost its appeal, seek out smaller, local banks, many of which aren't publicly traded, or credit unions, which are not-for-profit. The difference between these two types of banks and large, publicly traded ones is that banks that don't have to appease shareholders can focus on its customers first.
According to the Independent Community Bankers of America, local banks focus on "personal service, local credit decisions and ownership, and reinvestment in the community." And according to the Credit Union National Association, credit unions exist to provide financial literacy for their members, serve the needs of their members regardless of means, and offer lower rates than traditional large banking models.
While no one would recommend stashing savings under a mattress or issuing I.O.U.s for groceries, adopting some old-fashioned tactics for financial management might be just the ticket to thriving in the modern world.