We like to imagine that the basic rules of money management are straightforward: Spend less than you make and save some cash for the future. And yet, it is hardly ever that simple in reality. Money can be a complicated, emotional issue—and that can affect the way you save and spend.
Whether you personally identify as a spender or a saver, finding balance in your relationship with money can be key to living the life you want. So how would you answer this question: Do you tend to spend or save your money? For many of us, the answer varies depending on when we were born.
According to our most recent Couples & Money study,* roughly 7 in 10 people say they identify as a saver, while just 3 in 10 call themselves spenders. Those numbers vary by generation.
Older generations are less likely to identify as spenders
Early in life, money can be scarce, so savings may go on the back burner. And as we continue on our money journey, we'll have more money experiences, and our views may change and shift.
"Our money mindset shifts as we get older: We are much more likely to feel less comfortable with money as young people and then we get more protective and interested in money as we get older," says Megan McCoy, PhD, a licensed marriage and family therapist, an accredited financial counselor, and a Kansas State University professor of practice in personal financial planning. Her research focuses on financial therapy, or the exploration of the relationship between money and emotions.
Another reason for the shift toward saving may be due to a fully developed brain. "Our ability to reflect on the future consequences of our actions is dictated by our frontal lobe. Research has shown that our frontal lobe does not fully mature until we are about halfway through our 30s," McCoy says.
So is there a way to balance both savings and spending throughout your life? Yes! You can start by taking a close look at where you fall on the saving and spending spectrum.
Savers vs. spenders: Is it all in the brain?
Having a strong tendency toward saving or spending may have a lot to do with emotions and the way your brain is wired.
"Brain studies have found that for people who identify as savers, the part of the brain that registers pain lights up more when they spend than it does for spenders. They literally hurt more from spending than other people do," McCoy says.
On the other side of the coin, research has found that people who tend to spend money don't feel as much pain or discomfort from spending. What's fascinating is that researchers have found that there is no significant difference between savers and spenders regarding materialism. It's not that spenders want more; they just hurt less when they spend.
Why we are the way we are
So why does that happen? How can some people, even within the same family, become savers while others tend to spend? It actually starts when we're young.
"People experience big money moments as they're growing up and becoming an adult. Sometimes these moments are good and sometimes they're bad, but they often leave a lasting impression on our relationship with money," McCoy explains.
It could be experiencing poverty as a child or seeing your parents argue over money. Or it could be positive experiences like family budget discussions or going on a big vacation your family saved for.
"Our money experiences lead to our attempts to make sense of how money works in our lives and in the world," says McCoy.
While our early money experiences might shape us, they don't have to define us for life. Consider your upbringing and experiences and decide which money values you want to keep and which you want to ditch. "Setting these types of money intentions can be a great way of calibrating your own money mindset," says Livia Binks, a vice president at Fidelity.
How to balance spending and saving
If you want to cultivate new money habits, try some life hacks to bypass your usual response.
"The goal is not to make you a saver or spender—the hacks you create for your life should be around balancing your natural instinct," McCoy says.
Tips for spenders
- Automating financial decisions can help take your emotions out of the equation and build a strong savings foundation. Consider setting up automatic transfers to savings accounts with each paycheck and signing up for the workplace savings plan if you have one. And then periodically take a moment to celebrate your continued savings path. Celebrating the small things may help keep you on the lifetime journey of saving.
- Spend with cash not credit. Consider the envelope method for cash management. The envelope system is a disciplined approach to managing your spending to reach your savings goal and not use a credit card to pay for purchases if you are short on cash. After assigning a spending category to each envelope and allotting cash to each, the money in the envelope is all you get for each category until the next payday. When the cash is gone from the envelope that month—that is it. Any extra money goes into savings. You can also apply a digital approach to this method by using an app or a spreadsheet. This can help keep you accountable and, research has found, there's an added level of mental resistance to taking money out of its designated envelope and using it for something else. It can help if you write the name of the category and then seal the envelope.
- Indulge in online shopping but don't buy. Piling your cart with items can bring as much joy as actually buying things (and it's very easy to pile that cart high online). But sometimes we can experience buyer's remorse when all those boxes arrive. Instead of heading to the checkout page, put everything in your cart and wait 24 hours. Then go back and decide what you really want—if anything. Oftentimes, once the thrill of the click wears off, we see things in a different way, McCoy says.
- Think about how long it takes to work off what you buy. Your time is valuable. It's important to consider how much of your time each purchase costs you. "If I want to buy a big ticket item, I might pause when I realize that it's 10 or even 20 hours to equal the price—I may question if it's worth it. Sometimes it is," McCoy says.
Tips for savers
- Transfer money to a designated spending account for fun. "And then when you use the fun money you should never experience stress or anxiety because you have created a plan to make sure that money is safe to use. And I think that kind of gives a little peace of mind," McCoy says.
- Consider non-cash payment options—since spending cash can feel worse than spending with a card, studies have shown. If you pay the bill off each month, you may even come out ahead with a rewards or cash-back card.
A balanced approach to money can make you happy
No matter where you fall, you may benefit from more mindful money management. Finding a balance with your money may help you achieve your short- and long-term goals and have some fun along the way.