How to Use Your Memory to Boost Your Savings

New research sheds light on how to make better spending decisions. 

A stack of colorful sticky notes on cork bulletin board.

Deciding to save might depend on remembering how that money could have been used later.


Oleg Urminsky, an associate professor of marketing at the University of Chicago Booth School of Business, wanted to explore a fundamental question about how people decide whether to spend or save: “If you can have a smaller amount now or a larger amount in the future, how do you make that tradeoff?” he asks. The answer helps explain a lot about human behavior, including how much we save for retirement, whether we have a rainy day fund and even health choices like whether we splurge on dessert or go to the gym.

Urminsky’s research had investigated how people’s relationship with their future selves affects how likely they are to save: The closer people feel to their future selves, the more likely they are to put money away for that person. “We’re more generous with people we see as most similar to us, so if we see our future self as a different person, then we’re less motivated to worry about if they have enough resources,” he says.

Taking that finding one step further in a forthcoming paper, Urminsky looks into the role of memory, and whether the decision to save (or not) depends on remembering how that money could have been used later instead. In other words, maybe some people splurge now instead of saving because they simply forget that saving is important, or maybe they do remember and they just don’t care, especially when faced with an enticing $100 pair of jeans, or $3 coffee.

[Read: How to Meet Your Future Self, and Save.]

“Maybe someone is buying coffee and not thinking about the future consequences. Maybe another person thinks, ‘I’m trying to save, and I could put that $3 to those goals instead, but I just don’t care.’ And maybe a third person, who is most likely to save, does think about it and feels it’s important,” Urminsky explains.

In his experiment, Urminsky found that the people who were most willing to reduce their spending in favor of saving were most likely to remember to think about other potential uses of the money and to care about the long-term benefit of saving. “So just reminding people to care about the future is not enough … They also have to care about their future self,” he notes.

Are you ready to apply that finding to your own life? Here are three strategies to maximize your own savings based on Urminsky’s work:

1. Stop before you shop.

Urminsky says when you’re about to splurge on coffee, for example, stop and ask yourself: “Am I really in the mood for coffee? Is this a good price? For most people who haven’t taught themselves to think this way, they don’t consider how much retirement savings that $4 would amount to instead,” he says.

[Read: The Secret to Saving for a Rainy Day.]

His suggestion echoes the concept of  the credit card sleeves created by the nonprofit Jews United for Justice, which encourages shoppers to pause and reflect on the true impact of their purchase. The credit card sleeve, designed to fit around credit cards, ask: “Is this something I need?” “Can I borrow, find one used or make one instead of buying new?” “Will this purchase enhance the meaning and joy in my life?” (The Center for a New American Dream offers a similar credit card sleeve, called a Wallet Buddy.)

Saving for the future seems to depend on people remembering that there are alternative uses for their money, Urminsky points out, and sometimes we all need extra reminders of that.

2. Make a list of your priorities.

Sitting down and making a priority list of how you want to spend money, and reviewing the list on a regular basis, can keep the importance of saving at the top of your mind, Urminsky says, and then you’re more likely to remember those longer-term goals and your future self in the check-out line.

“Whenever people are in financial planning mode and they’re doing things like writing down what they’re saving for, then it’s easier to develop a habit of thinking about spending in terms of tradeoffs,” he says. “Some people need an external queue, like sitting down with a checkbook every Sunday, to help them track things and think about the impact of spending,” he adds.

3. Make it harder for you to spend.

This strategy is a tricky one because so much of modern life seems focused on making it easier for us to spend: Credit cards, “one-click” ordering and online shopping can make us feel as if we’re not even dealing with real cash, anyway, but virtual stuff that is easily replenished.

“Spending with credit cards is just too easy,” Urminsky says. “In the old days, people would have different accounts and put their money in separate envelopes, and that forces you to confront the tradeoffs in financial decision-making.” Even if you don’t return to paper-based envelope budgeting, you can sit down and create a priority list for your money, which will help you think through the various opportunity costs and options that you face.

[See: 10 Ways to Upgrade Your Finances in 2014.]

Urminsky says even for an expert like himself, it’s not easy. “Thinking about the future and future options is definitely my blind spot," he admits. "I wind up getting tunnel vision and focusing just on immediate priorities, and forgetting about long-term goals, and that’s something I try to do more of.”

He’s certainly not alone.