Key to savings wealth is all about connecting with your future self: UBank
Monday 10 July 2017
Do you ever find yourself dipping into your hard earned savings to pay for clothes or a trip away? Well you’re not alone, with new research revealing that Australians withdraw a whopping $30 billion each year from their savings accounts.
The study, conducted by online provider UBank, found that 2 million Aussies have less than $1,000 in their savings accounts, with 35% of those surveyed admitting to not having a dedicated savings account at all.
While 22% of respondents stated that they were actively trying to put money away, many were regularly seduced by spending money on short-term experiences or items which in turn made saving difficult.
Fortunately for Aussies trying to save, UBank may have discovered a way to change consumer spending habits and put more money away.
UBank teamed up with Dr Phil Harris of Melbourne University to record the attitudes of 50 Australians aged between 22 and 50 in a two-stage experiment which aimed to test the idea that Aussies favour instant gratification over long-term gains because they are disconnected from their future selves.
“We wanted to understand the mindset behind spending and saving at a deeper level, and ultimately see if we can be re-wired to think differently,” said UBank CEO Lee Hatton.
Participants were first hooked up to an EEG (Electroencephalography) machine to record their brain wave activity in response to a series of financial questions, followed by a confrontation with their ‘future selves’ in which they were presented with a digitally manipulated image of themselves aged between 10 and 20 years older. They were then asked a second series of financial questions while still hooked up to the EEG machine.
The study found that focusing on their future selves had a huge impact on participants’ attitudes toward saving.
“Humans are wired to want rewarding outcomes immediately, so it was very interesting to conduct this experiment. The results found that the people were significantly more likely to choose to save money when they became more in touch with their future self,” said Dr Harris.
“After interacting with visualisations of themselves later in life, 72 per cent of participants shifted their mindset towards wanting to save, versus spend money.”
According to the Mozo savings calculator, even by putting away just $50 from their fortnightly paycheck into a high-interest savings account, Aussies could save over $35,000 in 20 years - a significant windfall for their future selves.
UBank plans to use the findings from the experiment to better help their customers achieve their savings goals.
“Using artificial intelligence, we will create an experience within our internet banking platform to help customers plan for ‘regular’ expenses such as monthly phone bills and also ‘irregular’ costs like car insurance, which need to be paid less frequently,” said Ms Hatton.
“With money set aside for these kinds of expenses, customers can then manage their daily spending allowance and savings plan more effectively, similar to the way fitness apps support wellbeing.”
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