What are the tricks to motivate us?

It’s good to have savings for rainy days or for retirement. We all know that. But do we all save regularly to achieve these  goals? Doubt that. So why don’t we act according to our knowledge? Could  someone nudge us to do so?  

Many researches have come to the conclusion that there are some clever tricks that can help people set financial goals and achieve them. Perhaps even more important than improving knowledge of finances is to  influence people’s behaviour.

Leonore Riitsalu, researcher and expert in financial education, explored ways of improving behaviour in managing personal finances. She used interpretive methodology and an intervention in five financial education courses in Estonia.1 Riitsalu hypothesised that applying behavioural insights into the design of financial education helps the participants to improve their financial behaviours. The intervention employed goal setting, partitioning, commitment to achieving the goal, feedback, deadlines, peer pressure and advice.

Set yourself specific goal

Riitsalu’s research revealed that promotional goals are more motivating than prevention oriented goals. In other words: it is more motivating to save 50 euros per month for vacation or some other rewarding and specific goal than to save just in case for rainy days.  Peer effects can be used for motivating to reach those goals but these tend to work better in more similar groups. Deadlines and reminders are powerful tools for staying on track and achieving the end goal.

What can we learn from that?  

First, to motivate yourself to manage personal finances better one has to set concrete, specific and measurable goals. Second, policy-makers and educators should keep in mind that financial education programmes need to be designed more carefully to have influence on actual behaviour, instead of improving knowledge only.

1 Riitsalu, L. Goals, commitment and peer effects as tools for improving the  behavioural outcomes of financial education. Citizenship, Social and Economics Education 2018, Vol. 17(3) 188–209.

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