Being positive about what’s to come can encourage individuals to save more money, especially among those with lower incomes, as highlighted by recent research.
Having a hopeful outlook on the future might assist individuals in increasing their savings, with the impact being particularly significant for those earning less, according to a study from the American Psychological Association.
The study revealed that individuals who exhibited higher levels of “dispositional optimism” — the inclination to foresee favorable outcomes — tended to save more money over time in contrast to their less hopeful counterparts.
This research appears in the Journal of Personality and Social Psychology.
“Typically, we view optimism as a sort of wishful thinking that could encourage people to save less for their future,” expressed lead author Joe Gladstone, PhD, from the University of Colorado Boulder. “However, our findings indicate that optimism might actually serve as a valuable psychological asset that supports saving, particularly during tough financial times.”
Gladstone, together with his co-author Justin Pomerance, PhD, from the University of New Hampshire, examined data from eight significant population surveys across the U.S., the U.K., and 14 European nations, involving over 140,000 participants altogether. Each survey included some aspect of optimism, asking participants to agree or disagree with statements like “I always feel hopeful about my future,” “I believe that more good things will happen to me than bad,” or “During uncertain times, I tend to expect the best outcomes.” The surveys additionally collected information on participants’ income, savings, and in some cases, total assets.
Among these surveys, three were cross-sectional, which involved surveying participants at a single point in time, while five were longitudinal, where participants were surveyed multiple times across several years.
The researchers consistently found that those who exhibited greater levels of optimism reported having more savings on average. For instance, a one-standard-deviation rise in optimism corresponded with an increase of $1,352 in savings for households that had a median savings balance of $8,000. This trend persisted even after adjusting for demographic and various other factors that could affect both savings and optimism, including age, gender, relationship status, parental status, childhood socioeconomic background, health, job status, and the “Big Five” personality traits (conscientiousness, extraversion, agreeableness, neuroticism, and openness to experience).
“When we accounted for those variables, the influence of optimism was comparable to what earlier studies identified for conscientiousness, a trait widely acknowledged for its positive effects on financial success,” Gladstone added. “Optimism seems to have a marginally stronger impact on saving habits than financial knowledge and risk tolerance.”
The influence of optimism on saving behaviors was most pronounced among individuals with lower incomes, the researchers found. This outcome is logical, according to Gladstone, since higher earners typically have more automatic saving opportunities, such as through mortgage payments (which build home equity) and direct deposits to retirement accounts. Alternatively, they may simply have disposable income allowing them to save.
“For someone living from paycheck to paycheck, saving may feel like an impossible task,” Gladstone noted. “However, maintaining an optimistic perspective might inspire them to put away money despite current difficulties.”
The study offers valuable insights for financial education initiatives and policies designed to enhance savings rates, especially among economically vulnerable communities. Integrating techniques that foster optimism with conventional financial literacy training could create an effective combination, the researchers suggest.
“Ultimately, fostering a hopeful mindset about the future combined with sound money management skills might be crucial for enabling more people to achieve financial stability,” concluded Gladstone.
