Is saving money on your to-do list, but for some reason you can’t encourage yourself to add substantial funds to your savings? You may think the lack of incentive comes from an inability to find great savings account rates, but in actuality, it may be that you don’t have peers in your circle who are lighting a fire under you.
A working paper, released by the National Bureau of Economic Research, revealed that lower interest rates on savings accounts have much less to do with a person’s incentive to save than people think. In fact, learning how to save money consistently can be accomplished by simply asking your friends to save with you.
Saving Money Is Easier with Peer Pressure
This week, the National Bureau of Economic Research’s paper, “Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device,” revealed that saving money is more likely to occur among people who are motivated to do so by their peers.
The paper examined a study conducted with over 2,600 low-income micro-entrepreneurs in Chile who were randomly divided into three groups: 1) a self-help group that could publicly announce savings progress and monitor savings every week, 2) a control group given a basic savings account with an interest rate of 0.3 percent and 3) a group given high-interest savings account with an interest rate of 5 percent.
While most would assume the group with a high-yield savings account would post the highest savings amounts, it was actually the group which shared its savings results with others that saved the most money. In fact, the peer-oriented group deposited 3.5 times more often into a savings account and had an average savings balance of almost twice that of the control group.
From these results, researchers concluded that a higher interest rate had little to do with saving money. Instead, individuals who are aware of the savings habits of peers are more likely to save. Also, the study also found that individuals who receive regular updates on others’ savings or are pushed to save through ultimatums (via text or other means), are more likely to save.
How to Save Money with Peer Savings Groups
If you have been trying to figure out how to save money but are having a hard time getting started, it may be time to create your own peer savings group. Here are a few ways to get started:
- Create a group with close friends and family. If you have a few friends or family members who often complain about having no money, set up a time each week for everyone to get together. During this time, set up or manage your budgets as a group. Also, take shopping trips together and save money by stacking coupons to ensure no one takes part in impulse shopping.
- Save money with co-workers. Another route to take is to join together with co-workers who are interested in boosting savings. Get together to discuss your 401(k) packages and make sure you’re making sound investments. Also, regularly remind each other to set money aside from your paychecks for savings.
- Set up a group via social networking. Social networking makes it easy for people to create groups for just about anything. By creating a savings group, you could get together with your online friends to discuss your savings tactics and ideas, while also sending each other electronic reminders to make savings account deposits.
Joining together with others to discuss financial goals while holding each other accountable for saving money could make a huge difference in how much you set aside. If you are trying to figure out how to save money without slacking off, setting up a peer savings group may be the way to go.