March 2019


Saving the Future Self
 



In collaboration with:
Vrije Universiteit

This investigation of self continuum goals’ effect on financial saving behavior shows that goal setting increases sense of control significantly.

S


Author
Meriç Güzelant

Saving behavior is a fundamentally future related behavior. The decision to save money for the future requires foregoing the temptation to spend money now in order to enjoy the accumulated resources in the future.This research was conducted under my supervision on behalf of Mirabeau, a Cognizant Digital Business. With a team of young talented master and PhD students in the human sciences, we have conducted foundational research into consumer behavior in the focus industries of Finance and Travel, and into the role that new technologies play in people's daily lives. Great research is the precondition for great design. However, this is not an easy task, as we are evolved in a way to give more importance to today in the face of future. In the face of this mismatch, can we make financial decisions that do not dismiss the future?
     The results from our analysis showed that, goal setting increases sense of control significantly. Furthermore, the increased sense of control was found to reflect on individuals saving behavior as well.

Saving the future self: fragment of an old Dutch banknote

Increased sense of control reflects on individuals saving behavior.

Sense of control

The main aim of this report was to investigate whether goal setting with differing perceived self-continuity led to increase in saving behavior. This research was motivated by the need for understanding the global demographic shift that is occurring at the moment. Increasing life expectancies (especially in the developed countries) raise the need for individuals to depend on their savings they have accumulated during their working life, more in their retired years that are increasing as well. Initially, we laid out the psychology theories that explained saving behavior. By further focusing on the evolutionary mechanisms that play into decision making structures we were able to narrow down to the key determinant of saving decision in humans: sense of control. We focused on concepts that indirectly affect saving behavior by affecting sense of control and formulated an experimental study to test our hypothesis derived using the current directions of the literature.

Goal setting

The results from our analysis showed that, goal setting increases sense of control significantly. Participants who wrote down a financial goal that they wanted to achieve in the future felt highly in control, while their counterparts who did not write a goal reported much lower levels of felt control. This expected relationship is in line with the psychology literature and informs us that goal setting indeed increases sense of control. Furthermore, the increased sense of control was found to reflect on individuals saving behavior as well. When given the option, participants who didn’t set a goal chose to spend their money on gift buying and fun occasions (present oriented spending) at an equal amount with putting money into retirement and checking accounts (future oriented saving), while goal setting individuals ended up saving most of their money for future. This finding is indicative of the power of goal setting that increases the sense of control. Incorporating such goals into services that urge individuals to save for the future may be helpful in achieving higher saving rates. Furthermore, including individuals into the goal creation process that allows them to define their goals by providing the reasons and motivations they might have for wanting to achieve the goal would be helpful in personalizing​ ​the​ ​process.

Financial illiteracy

One interesting finding was the choice of which account to put their money on while making the decision to save it. When given the two options to either save their money by putting it into either to a retirement or a checking account, participants overwhelmingly chose the option to store their money on a checking account, allocating very few amounts to a retirement fund. This finding may be read in three ways, a) the financial illiteracy regarding retirement savings is decreasing the importance given to it, b) the portion of income allocated to retirement funds is actually an adequate amount (around 13% of income), or c) as participants are feeling supported by the Dutch pension system, they do not have the need or the information required for allocating money themselves (which is in a way a joint reason with the reason a))

Self continuum goals’ effect on financial saving behavior

Furthermore, the analysis on what distance in age do people feel closest to provided compelling results. The future self in, in order, 5 years, 10 years and 40 years were the future selves who were felt most connected to, whereas the future self in 20 years was not as much connected to. This finding was again expected as close future selves are close enough to be imaginable (hence relatable), the old self is imaginable, yet imagination of a self in 20 years in the future contains more vague features. This pattern was found to affect individuals saving decisions as well. Individuals chose to save the least amount of money when they were asked to imagine themselves in 20 years in the future, while other participants chose allocate significantly higher amounts to their future selves in 5,10 and 40 years. This pattern illuminates a fact that is counter to the most practices in the field. Advertisements that are directed at potential customers who are candidates for opting for retirement plans mostly paint the picture of a comfortable old person who is enjoying retirement to the fullest. While it seems like it makes sense to provide the picture of the “very end goal”, this approach misses the point of relatability. Instead, including media and other messages that paint a picture of a self in the near future would ease establishing the connection in the minds of a client.

Further reading

This article is an abstract of the research report. Interested in reading the full report? Please contact me, info@henkhaaima.com.

March 2019


Saving the
Future Self
 



In collaboration with:
Vrije Universiteit

For a long time, chatbots were mainly notorious for what went wrong. Quietly, a lot has been improved since then. Patents point to an imminent leap forward. With better trained AI, real-time interaction and more personalization, conversational AI can be used in more and more ways.

Author: Meriç Güzelant

S

Saving behavior is a fundamentally future related behavior. The decision to save money for the future requires foregoing the temptation to spend money now in order to enjoy the accumulated resources in the future. However, this is not an easy task, as we are evolved in a way to give more importance to today in the face of future. In the face of this mismatch, can we make financial decisions that do not dismiss the future?
     The results from our analysis showed that, goal setting increases sense of control significantly. Furthermore, the increased sense of control was found to reflect on individuals saving behavior as well.

Saving the future self: fragment of an old Dutch banknote

Increased sense of control reflects on individuals saving behavior.


Sense of control

The main aim of this report was to investigate whether goal setting with differing perceived self-continuity led to increase in saving behavior. This research was motivated by the need for understanding the global demographic shift that is occurring at the moment. Increasing life expectancies (especially in the developed countries) raise the need for individuals to depend on their savings they have accumulated during their working life, more in their retired years that are increasing as well. Initially, we laid out the psychology theories that explained saving behavior. By further focusing on the evolutionary mechanisms that play into decision making structures we were able to narrow down to the key determinant of saving decision in humans: sense of control. We focused on concepts that indirectly affect saving behavior by affecting sense of control and formulated an experimental study to test our hypothesis derived using the current directions of the literature.

Goal setting

The results from our analysis showed that, goal setting increases sense of control significantly. Participants who wrote down a financial goal that they wanted to achieve in the future felt highly in control, while their counterparts who did not write a goal reported much lower levels of felt control. This expected relationship is in line with the psychology literature and informs us that goal setting indeed increases sense of control. Furthermore, the increased sense of control was found to reflect on individuals saving behavior as well. When given the option, participants who didn’t set a goal chose to spend their money on gift buying and fun occasions (present oriented spending) at an equal amount with putting money into retirement and checking accounts (future oriented saving), while goal setting individuals ended up saving most of their money for future. This finding is indicative of the power of goal setting that increases the sense of control. Incorporating such goals into services that urge individuals to save for the future may be helpful in achieving higher saving rates. Furthermore, including individuals into the goal creation process that allows them to define their goals by providing the reasons and motivations they might have for wanting to achieve the goal would be helpful in personalizing​ ​the​ ​process.

Financial illiteracy

One interesting finding was the choice of which account to put their money on while making the decision to save it. When given the two options to either save their money by putting it into either to a retirement or a checking account, participants overwhelmingly chose the option to store their money on a checking account, allocating very few amounts to a retirement fund. This finding may be read in three ways, a) the financial illiteracy regarding retirement savings is decreasing the importance given to it, b) the portion of income allocated to retirement funds is actually an adequate amount (around 13% of income), or c) as participants are feeling supported by the Dutch pension system, they do not have the need or the information required for allocating money themselves (which is in a way a joint reason with the reason a))

Self continuum goals’ effect on financial saving behavior

Furthermore, the analysis on what distance in age do people feel closest to provided compelling results. The future self in, in order, 5 years, 10 years and 40 years were the future selves who were felt most connected to, whereas the future self in 20 years was not as much connected to. This finding was again expected as close future selves are close enough to be imaginable (hence relatable), the old self is imaginable, yet imagination of a self in 20 years in the future contains more vague features. This pattern was found to affect individuals saving decisions as well. Individuals chose to save the least amount of money when they were asked to imagine themselves in 20 years in the future, while other participants chose allocate significantly higher amounts to their future selves in 5,10 and 40 years. This pattern illuminates a fact that is counter to the most practices in the field. Advertisements that are directed at potential customers who are candidates for opting for retirement plans mostly paint the picture of a comfortable old person who is enjoying retirement to the fullest. While it seems like it makes sense to provide the picture of the “very end goal”, this approach misses the point of relatability. Instead, including media and other messages that paint a picture of a self in the near future would ease establishing the connection in the minds of a client.

Further reading

This article is an abstract of the research report. Interested in reading the full report? Please contact me, info@henkhaaima.com.

This research was conducted under my supervision on behalf of Mirabeau, a Cognizant Digital Business. With a team of young talented master and PhD students in the human sciences, we have conducted foundational research into consumer behavior in the focus industries of Finance and Travel, and into the role that new technologies play in people's daily lives. Great research is the precondition for great design.