How many times have you tried to save your earnings or your pocket money with the aim of satisfying a desire?
We struggle every day to look for our goals in terms of savings, but don’t worry! It’s "natural" for human beings.
"Our brains are not developed for the purpose of making smart financial decisions," explains Professor Dr. Mira Fauth-Bühler, neuroscientist and professor of economic psychology and neuroeconomics at the FOM University of Applied Sciences for Economics and Management in Stuttgart, Germany.
We are always looking for a reward that represents an incentive big enough to reject our current consumption and save money.
Dr. Fauth Buhler explained that we are guided by the control system of our brain, which works like the CEO of a company: it tries to guide the organization towards long-term goals. Our control system helps to avoid the risk of not achieving our savings targets.
Many factors influence our savings behaviors and among them we find gender, age, and country of origin.
It is interesting to try to understand how environmental determinants affect our behavior.
It is assumed that individual contingent situations have an impact on how we decide to spend but do they also exist in reference to a macro level? Do Italians spend money earned in a different way than Germans, French or Spanish?
Even if we can’t take this 100% for granted, we can analyze last year’s trends across Europe thanks to a study by N26 (a European “Mobile” Bank) that analyzed European citizens' habits in terms of savings and spending in 2021.
The four countries involved in the study are: Germany, Italy, Spain, and France.
The three aspects considered are:
Country of origin;
The country of origin
With an average monthly income of € 2,061.17 per user, Germans saved an average of € 368.22 per month (18% of their income). It is surprising to see that even if Germans earn more than other citizens of the countries analyzed, they are just after Spain in terms of savings.
With an average monthly income of € 1,230.24 per person, the French saved € 69.24 per month (equal to 6% of their monthly income). The reason why in France the saving trend is rather low can be linked to economic or cultural elements and appears to be the country with the lowest percentage of savings among those analyzed.
Instead, Italians saved an amount of 164.58 euros per month, with an average monthly income of 1,016.20 euros per user.
With 16% of the savings, the Italians saved more than the French but less than the Germans and Spaniards.
It is curious to see that even if Milan is the financial center of the Peninsula, users of Rome are among those who have saved more than those in the Lombard capital.
The biggest surprise of the study was Spain. The monthly saving percentage reached 23%! With an average income of € 1,108.91, Spaniards save € 252.00 per month. Much more than Italians and French.
The country of origin is not the only aspect considered with a strong weight on the result.
The second element analyzed is the gender of the user! The survey and its results showed that the gender gap in income is real and becomes wider in the 55-59 age group.
Despite this sad consideration, it is interesting to note how women were able to save more (22% of income) than men (16%).
The CEO of our brain - the control system - works best at suppressing irrational spending behavior in women.
(The survey states that in the future there is the goal of collecting more data even from individuals who define themselves as non-binary or genderqueer.)
Having considered the country of origin and gender, we must also analyze age trends. Individuals are able to save more getting older. Europeans who have had the most difficulty saving are in the 20-24 age group.
The reason this happens can be related also in this case to the control system: it is the part of the brain that matures later. Young people find it much harder to save and are more inclined to spend.
Younger people are more likely to indulge in impulsive spending.
And what about Covid?
Over the past year we have changed our habits in terms of time spent outside our home, activities, and relationships.
We have changed our priorities, and this has also happened in how we conceive the value of goods purchased, especially for all those who hold a short-term utility. The purchase of shoes for example has lost its importance compared to spending habits before the pandemic.
Important tips in terms of spending
Our study ends by giving us 5 important tips that can help us better control our spending impulses.
It is essential not to go shopping when we are stressed or in a bad mood. In that situation our control system will go offline, and we will be much more likely to spend.
The second aspect to consider is the use of a credit card. It may sound strange but paying with a credit card you can end up spending more than when you use cash. We will not keep count and costs will decouple in our minds.
If we’re in a hurry, we shouldn’t go shopping. Our critical thinking will deficit in the situation of not having enough time and our reward system will fall into error.
Another unexpected element is to identify the triggers. There may be some elements that make us more prone to spending. Just like when in the morning when we drink coffee we then immediately feel the need to smoke a cigarette!
The last advice is to try to gain control of the surrounding environment. If we spend our day in the city center entering and exiting shops, we will be much more inclined to spend money than in the situation of spending a day walking in a forest.
I hope you found the survey interesting and wish you less trouble with your piggy bank!