More than half of Americans report having less than $25,000 saved for the future, according to a 2011 Employee Benefit Research Institute survey. An Associated Press and LifeGoesStrong.com poll found that 25 percent of baby boomers have no retirement savings at all. And the American Institute of Certified Public Accountants recently revealed that 56 percent of the people in their poll are not even saving for retirement.
We’ve all read about celebrities who, after years of earning millions of dollars, find themselves declaring bankruptcy. On the flip side, you probably know someone of modest means who has managed to sock away significant savings. Good savers and bad savers span all income levels. Keith Redhead’s research for Coventry University Business School provides some insight into what really separates savers from non-savers.
Bad savers. Redhead’s review of several studies on personal financial behavior reveals that non-savers are more likely to share these characteristics:
- A negative view of other people
- A belief that they are less happy, healthy, and emotionally secure
- An inability to plan ahead
- A mistrust of financial advisers
- A higher level of fear
- A belief that outside events control their lives, rather than feeling that they are in control
Good savers. It seems so simple. To save more money, simply spend less. But the ability to save money is not always the result of a conscious decision not to spend. A review of the research shows that some people simply have little desire to spend beyond a particular level. For them, saving is just the residual money remaining after they have purchased what they wanted. They save without feeling deprived. Plenty of studies have shown that beyond a certain income level, more money does not translate into more happiness. But the reverse is not true according to Cahit Guven’s study for Deakin University’s School of Accounting, Reversing the Question. Does Happiness Affect Consumption and Savings Behavior? Apparently it does. Guven’s results show that happy people:
- Are more likely to be savers
- Are likely to save even more money
- Are less likely to have debts
- Have more self-control over their spending decisions
- Are more likely to take the future into account
- Are more optimistic, which also leads to increased savings
It should come as no surprise that people who are looking forward to retirement and have a positive view on aging save more money for retirement. Perhaps in an attempt to delay the inevitable, those with more negative views of retirement and growing old are less inclined to save for it. Maybe to save more we just need a little attitude adjustment.
Happy savers. Most people think the savings problem is a will power problem. It seems you have to deny yourself things that you want in order to save more money. But it looks like it’s not actually a will power problem, it’s a happiness problem. So instead of forcing yourself to exercise more willpower, strive to be happier. In the best case scenario your bank account will grow along with your happiness. In the worst case, at least you’re a little happier.
Sydney Lagier is a former certified public accountant. Since retiring in 2008 at the age of 44, she has been writing about the transition from productive member of society to gal of leisure at her blog, Retirement: A Full-Time Job.