We Have a Natural Bias to Try to Earn More Instead of Saving More, Even When It Doesn’t Make Sense.
If you need money, it’s natural for most of us to figure out how to make more money. In an article for Scientific American, behavioral economist Dan Ariely , Kristen Berman, and Wendy De La Rosa discuss why this is and why it is not always a good option.
When we think about financial security, it’s not surprising that we’re more attracted to new earning opportunities than savings opportunities, even when mathematics isn’t really conducive to it. To test this theory, the researchers asked participants to choose between two financial situations, in one of which the participants would save more money and in the other they would earn more, but at the expense of a higher interest rate. Most people paradoxically preferred the one where they made more money, even if that meant they were paying a higher interest rate on their debt. In the end, here’s what the researchers decided:
All of these studies show that we have a natural bias towards “making money” rather than “saving” when we are in financial difficulty – not because we don’t know how to save money or we are not trying to save money, but because that we perceive making money as a more productive way to improve financial well-being.
And while it can be helpful in some cases to prioritize earning opportunities (such as when we are looking for a new job or investing in the market), it can also be a barrier to asset creation and financial well-being.
Of course, all this is not a universal truth, but this is not much of a surprise. Making more money means we will have more money, which seems like the best way to get out of any financial hardship. But this may not always be the case, and the next time you try to figure out how the hell to manage your budget when you’re broke , consider what your initial gut reaction to trying to make more money might lead to you. got lost.
1 Weird Trick That Can Help People Increase Their Savings | Scientific american