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 people 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, now what?
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. The app 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.
Lastly, you can do it the old fashioned way, and save $5 in cash every day.
Bottom line: Just make it a goal. It works.
Feature Image: Twenty20