The psychology of saving: How to trick your brain into building wealth

The psychology of saving: How to trick your brain into building wealth 1

Anyone who has seriously considered growing their wealth through multiple means knows that there is a psychological aspect to saving and building wealth. An individual’s financial decisions are informed by several psychological biases. People can follow a set of rules to trick their brains into building wealth consistently over time.

The psychology of saving: How to trick your brain into building wealth 2

What are “money scripts” and why do they matter?

Brad Klontz, a financial psychologist, author, and professor, first introduced the concept of “money scripts” in public discourse. Klontz stated that people form beliefs regarding money as they grow up and become adults. These “scripts” are shaped by one’s friend circle, the people whom one looks up to, and one’s upbringing. A person’s money script can fall into one of the following four broadly-defined categories:

  • Money avoidance: If someone’s money script is “money avoidance”, they generally avoid thinking about money since they equate it with qualities like greed, corruption or evil. They might find it difficult to read financial statements, plan for the future, or budget consistently.
  • Money worship: This money script applies to people who believe that money is the solution to all their problems. They tend to spend money to buy happiness. This money script is generally associated with excessive generosity.
  • Money status: If one links money to social status, their money script is likely “Money Status”. An individual who has this money script may also believe that people with wealth are happier than those who have a lower socio-economic status.
  • Money vigilance: If one’s money script is “money vigilance”, they generally save high amounts and spend only on what they can afford.

How to build wealth by overcoming psychological barriers?

Follow these steps to build wealth consistently by overcoming all psychological barriers:

  • Choose a financial goal and note it down: Doing so can help individuals determine their savings target amount and work towards achieving it in a disciplined manner. An example of a financial goal could be – “saving for my higher studies in the UK in 2026.”
  • Add a time frame to the financial goal: In the example cited in the previous point, a time frame was specified. It’s a very important part of a financial goal.
  • Open an online savings account: Next, open a digital savings account that offers a high interest rate. One should also assess the bank’s customer services and mobile banking services before applying for its savings account.
  • Automate one’s savings: After opening an online savings account, try to save a fixed amount every month by automating it. For instance, if an individual decides to save ₹6,000 monthly, they can automate these savings so that they get deducted from their account at the start of the month.
  • Invest and re-assess one’s portfolio regularly: It is prudent to also invest in securities based on one’s risk appetite and liquidity-related preferences. They should keep re-assessing their investment portfolio to take better investment decisions.

 People can use the tricks mentioned in this article to consistently grow their savings monthly. It is advisable to analyse one’s money script and take steps to reduce the impact of biases hindering one’s saving habits before starting their saving journey.

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