We know, you’ve been beaten over the head about how important it is to save money. No arguments here, it is incredibly important to save — morning, noon, and night.
But what’s the best way to get it done and save the most? Well, according to a new study from Shlomo Benartzi and Hal Hershfield of the University of California and Stephen Shu at the University of London, you are four times more likely to save if they focus on saving $5 dollars a day rather than trying to save $150 a month. (If you haven’t figured it out yet, $5 a day and $150 a month amount to the same thing).
The reason why this is the case they found is pretty simple: People tend to see the smaller number as something they can achieve, versus the bigger number which can feel like it is going to be impossible. $5 feels like the price of a cup of coffee. $150, meanwhile, feels substantial.
Not only did researchers find that people were more likely to be successful saving $5 a day versus $150 a month, the study also found that framing saving this way narrowed the participation gap between lower and higher incomes folks.
OK, so just tell me exactly how to save money
Now that you know that this is the best way to successfully save, there are a few ways to set yourself up for success.
You can use an app that will help you save small amounts throughout the month. Digit does this by monitoring your spending, and saving small bits of money for you throughout the month so you hardly even miss it.
Another way to start saving in small increments is to set up automatic transfers from your bank account to a dedicated savings account. We love Chime Bank since it’s 100% free, online and makes it super easy to set up those automatic transfers.
If you’d prefer to turn savings into a game, check out Long Game Savings. It’s an FDIC insured bank account that rewards you for saving with Coins to play games in the app. The more you save, the more you can play. You could win up to $1 million dollars.
Lastly, you can do it the old fashioned way, and save $5 in cash every day.
Bottom line: Make it a goal. Use apps to help you get there to make sure you actually do this. It works.
Feature Image: Twenty20