The Science Behind Spending

"I see my role if needed as a financial mentor but one who can show warmth, practicality and empathy."
-Katherine Hann
July 11, 2017

The Science Behind Spending

By Katherine Hann

The Science Behind Spending

We already know from marketing and psychology studies that there are many triggers which make us buy on a whim, and these are used to get us to spend more!

61% of Australians are not committed to a savings plan, and 46% don’t even have a weekly budget!

But can you train your brain to be better at saving?

New research from UBank in collaboration with Dr Phil Harris at The University of Melbourne (an expert in Consumer Neuroscience) sheds some more light
on the mentality of spending habits, and gives some guidelines to apply to your personal finances.

Have a look at the ‘brain-wave reading’ technology they used (Electroencephalography).

 

The ‘Science of Spending and Saving Experiment’ found:

1. It takes a much larger sum of money to convince people to deposit money vs spending it

2. Our natural default seems to be to seek immediate rewards- even if it hurts us later

3. People changed their attitude towards money when they saw their future selves

 

Armed with this information, UBank has inferred some useful tips to help us: 

Spending is emotional so try to make financial decisions when in a positive or stable mood: Easier said
than done, but we make impulse buys to reward us when we are feeling tired or down.

Don’t keep large sums of money in an easily accessible account: like the one linked to your debit card,
or worse- a credit card with a high limit! Put it somewhere that rewards you for keeping it there and not touching it.

Write down what you’re spending and share it with a family member/friend: It’s the best way to get feedback,
so be brave!

Use physical cash: seems a bit archaic, but the act of seeing your money disappear from your hands might
help.

Make saving a default habit: Don’t think about it too much, just set up an automatic transfer after payday
to put it somewhere out of sight and out of mind.

 

For more information, read the Ubank summary <here>, and for some tips on how to best manage your finances contact Katherine Hann on (08) 8299 9926 or katherine.hann@internode.on.net for expert Financial Advice.