blue piggy bank - spending and saving money

Psychology Of Saving And Spending Money

There are various different reasons as to why we spend money. It could be that we emotional spend, we just spend because we want something or just because we need it. Whatever the reason for your spending, do you have a reason to save? You rarely hear of anybody ’emotionally saving’, so what is the psychology difference between saving snd spending money?

Brain Activity

Before diving into the information on spending and saving money, we first of all need to understand how the brain plays a huge role in this situation. Our brains make decisions before we even know about them.

Behavioural economics appeared in the second half of the 20th century and it found a perfect way to be able to understand and explain the irrationality of human behaviour towards finance. Meaning that the decisions we make are rational.

Although, following this in the 1980s, two psychologists claimed that we do not actually make any ration decisions at all as our brains are too lazy leading to us always choosing the easiest thing to do.


Why do some people save more than others?

Although cashflow plays a huge part in this, psychology does as well. One person might earn double the amount of somebody else but have less money saved than them because they constantly spend it. Saving should not be seen as a task, but as something we all naturally do.

The psychology behind spending:

It takes a lot of work when training the brain to understand that we don’t need to buy everything we see which we like the look of. Also known as compulsive spending. But, once you have managed to train your brain to identify that, you know you are on the right path. It is not easy for our brains to identify the difference between a need and a want sometimes, this can especially be related to the behavioural economics in the 20th century. So learning psychology between these financial decisions is crucial.

spending money - woman with shopping bags


Sometimes we are pressured in different ways to spend our money, but is that normal? Of course! There are millions of people in the world who are pressured into spending, even when they know it is not the best option.

One example of this is when you are out with friends and have set yourself a specific budget. But, your friends say they are all going to grab some food and you know if you go too, you will exceed your budget. Do you go? If you said yes, you are not alone, but that probably is not the best option for you.

Emotional spending

Similarly, there is a psychological connection between our feelings and our spending habits. The best way to overcome this way of spending money unnecessarily is to find something else to use as an emotional boost.

Therefore, in these scenarios, we should think more about our choices before we make them.

The psychology behind saving:

Many people see saving as a chore to do, and others even think that they are losing money, but why? Once the money is put away to be saved, you typically should not touch it unless it is for the thing which you have been saving for. Saving doesn’t come naturally to everybody, but that doesn’t mean you can’t get into the swing of it. The are plenty of psychological saving tricks to put you on the right path.

ways to save money

Using cash

As simple as it sounds using cash is a great way to save money. This is because it is a lot easier to splash the cash using card payment or even ways like Apple pay. So, when using cash you can visually see how much money you are spending and that will probably enable you to control what you are spending, meaning you will save more money.

Use all of your senses

Before finalising a financial decision, a good way to figure out your answer is to use your five senses. Your subconscious brain doesn’t get abstract concepts as it is very literal. Klontz explained that the more you can see, touch, smell, hear and taste your goal, the more likely you are to achieve it. So, putting this in relation to money can really help with saving.

Extra help

Sometimes events occur in our lives when we have not planned for them. For example, you might find yourself with a bill which you need to pay as soon as you can, but you were not prepared for it so you did not save. Although saving is essential for these situations, not everyone will always be ready for them. Therefore payday loans could be an option but ensure it is paid back as soon as possible to save on the interest charges