Saving for one goal over many is a more effective way to help conserve the cash
Trying to save for a deposit on a house, your two weeks in the sun as well as a new car? You may be hindering your monetary progress if you are focusing on more than one thing, according to a new report.
A study carried out by two researchers from the University of Toronto’s Rotman School of Management discovered that those who want to save are increasingly able to put away vast sums of money if they focus on one goal, instead of splitting their priorities.
‘If you have only one goal it puts you in a more action-oriented mindset and helps you save more,’ says Min Zhao, an assistant professor of marketing.
Their research covered a wide range of different subjects, including households in rural India, middle-income dads in Canada, as well as working professionals residing in Hong Kong.
Despite the diverse group of people, the results were consistent and repeatedly showed that single savings goals were much more effective than multiple goals.
According to the results, having several savings goals distracted the savers, causing them to consider trade-offs between their different goals rather than just focus on implementing their preferred one.
These findings may now suggest that banks are taking the wrong approach when advising their customers on ways to save. ‘The most common mistake is to emphasise numerous reasons to save,’ insists Zhao.
Of course we will always have many things we need to save for, but the best thing to do, according to Zhao, is to integrate these goals into a moresingle or abstract goal, such as gaining financial independence or financial flexibility.