Every other financial advisor will suggest going for the monthly plan if you want to save money. But does that really work? Another strategy has been pulled out by financial analysts, and surprisingly, they’ve found that saving daily is deemed more effective than saving monthly. Keep on reading to find out why this is the case.
A Mind Game
Apparently, people are quadruple times more inclined to begin saving if they concentrate on only setting aside $5 every day, instead of $150 per month—even though they sum up to an equivalent amount in the end! The groundbreaking discovery came out from the study done by researchers from the University of California, Los Angeles, and the City, University of London.
According to the researchers, the result could be due to the fact that people are more likely to look at the bigger monthly figure as impossible, whereas the smaller amount feels more accessible. “Losing” $5 in a day is more agreeable because, well, it’s smaller. Psychologically, “losing” a substantial sum of $150 to a savings account just feels more unpleasant.
Another significant discovery that this research has made is that when you frame saving in more granular terms, you diminish the participation gap between lower and higher-income savers.
Saving small amounts daily
If you save small amounts of cash every day, you’ll surely be able to establish an emergency fund. But aside from that, you can also use this tactic to invest or save up for some other significant financial goal that you have in mind.
One way to make saving easier is to use an app such as Albert, Acorns, or Digit. The research participants actually cited using these apps in their saving journey. Albert and Digit register liquid savings, as they both evaluate how you spend and automatically draw funds from your checking account straight into a savings account. As for Acorns, it rounds up your acquisitions to the nearest dollar, before investing the difference.
If you’re into using any application to save, you can always just arrange automatic transfers to various savings accounts at your chosen bank.
Point to ponder
In case you’re a newbie at saving or investing, be cautious in getting too ambitious too soon. Keep an eye on your spending habits, as well as the balances on your bank account for a month. This way, you don’t unintentionally overdraft your account when it comes time to set up transfers.