Save, make, understand money


Behavioural scientist: why we bury our heads in the sand when it comes to money

Joanna Faith
Written By:
Joanna Faith

Behavioural scientist Nathalie Spencer explains why we are often reluctant to change the way we handle our money.

Inertia is something that is easy to relate to if you’ve ever failed at a new year’s resolution, and who hasn’t? Deliberately changing our behaviour takes up precious cognitive resources – headspace that could be used elsewhere on something ultimately more fulfilling than keeping track of interest rates – even if it is relatively easy to do.

For many, sticking with current behaviour might not bring the very highest monetary return, but it is deemed ‘good enough’ when considering the energy required to deliberately change behaviour. Settling for a ‘good enough’ option, called satisficing, takes less effort, and for many people that is enough of a benefit – but often it means they are not making the most of their financial situation.

Nearly three in 10 people in Europe don’t have any savings at all, and of those that do, more than a third have less than three months of take home pay in reserve. This finding from the recent ING International Survey Savings 2017 demonstrates just how fragile finances are for many people. To me, as a behavioural scientist, these findings illustrated some pervasive ‘thinking traps’.  At first glance, certain behaviour can seem to be counterintuitive, yet we know from behavioural science that these tendencies are common and hard to shift.

Economic theory predicts that lowering interest rates makes saving less rewarding and borrowing more attractive – so in theory people will not save as much and instead borrow to make investments. However, we found a whopping 56% said that low interest had not changed their savings behaviour at all. So why are we so reluctant to change the way we save when we could be better off?


One reason could be that we just don’t think about our finances enough.  Sometimes it is psychologically easier to avoid learning information if there is a chance that it is bad news. This is reflected in our research, where one in 10 people who have personal debt say they don’t even know how much they owe.

Maybe these people simply aren’t very good at keeping track. But maybe they are sticking their head in the sand to avoid knowing how big their debt really is, and the same logic can be applied to thinking about interest rates.

Optimism despite lack of savings

To get an indication of how people really feel about the amount they have put away, we asked people to what extent they are happy with their level of savings. On average, the results were fairly evenly split: roughly a third of people rate themselves as comfortable, and the same proportion rate themselves as uncomfortable. Unremarkable, maybe, but there are two notable points:

Firstly, this shows an increase on last year. While this is potentially good news, ‘comfort’ doesn’t always reflect the actual level of savings that people have, and doesn’t necessarily indicate people are saving well, it merely means they are not actively worrying about it.

Secondly, eight per cent of people say they are comfortable with their level of savings, yet have no savings at all. Are people being overly optimistic that no unexpected expense will pop up, or is this an extreme example of head burying, with people happier to live in ignorance than prepare for difficult times?

The truth is, even in the face of difficult times, we are human: sticking with what we know, avoiding bad news and remaining optimistic – sometimes without due reason.

Top tips for keeping your head out of the sand:

  • Set aside a regular time to check your bank accounts
    • Mark the calendar, set an alarm on your phone, or see whether you can set up your digital banking to regularly send you your balance. It may seem scary, especially if you you’re spending more than you can afford, but checking your bank accounts can help keep you on top of your finances, and stop you slipping into ‘head-burying’ territory.
  • Bundle the chore with something rewarding
    • If a more thorough review of your finances feels daunting, bundle it with something you love. For example, hold off on the next episode of that must-watch series until you’ve checked your balance and made any necessary budgeting adjustments. You’ll feel more motivated to check your balance if you know the chore will unlock a reward. Make sure the indulgence you choose doesn’t end up costing too much.
  • Think about your ‘future self’
    • What are your aspirations for your future, and what will you need to set aside today to ensure that you will be able to reach those goals? Imagining your future self and thinking about what you want to achieve is great motivation for saving.
  • Celebrate small successes
    • Those big goals are good to keep in mind, but make sure to set concrete shorter-term goals to help you get there. As reviewing your finances becomes more routine, you’ll be able to recognise even small steps in the right direction. Feel good about these successes. Taking control of your savings can put you on the path to a great one.

Nathalie Spencer is a behavioural scientist at ING