Why saving feels hard

Posted by Anders Toxboe on December 05, 2024 · 6 mins read

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Saving money seems simple in theory—set aside what you don’t need and watch it grow. Yet, for most people, it’s a constant struggle. This isn’t due to a lack of self-discipline but to deeply ingrained psychological biases that influence decision-making.

Take loss aversion, for example. People naturally feel the sting of losing money more acutely than the joy of gaining it. For many, saving feels like a loss—they’re giving up on immediate pleasures, like dining out or splurging on new gadgets. To counter this, reframing saving as a gain can make all the difference. Imagine showing users what they’re “buying” with their savings: the freedom of a stress-free retirement or the ability to take that dream vacation. Suddenly, the act of saving becomes less about deprivation and more about empowerment.

Another major barrier is present bias, the tendency to focus on the now at the expense of the future. The immediate reward of spending often overshadows the abstract benefits of saving. Designers can tackle this by making the future feel real and emotionally resonant. For instance, a savings app could transform generic savings goals into vivid, tangible outcomes—a “future-self fund” that delivers the freedom to travel or retire comfortably.

Compounding this is delay discounting, our tendency to undervalue rewards that are far off in the future. Saving for a distant retirement feels overwhelming and unmotivating when the target is an abstract six-figure sum. Breaking these goals into smaller, more attainable milestones can help bridge the gap. Encouraging users to focus on saving just $20 a week or hitting a $1,000 target within six months makes the process feel manageable and rewarding.

Finally, there’s the status quo bias, the human tendency to stick with default choices. Without proactive intervention, most people simply don’t take action to start saving. This is where smart design can shine—by making saving the default option, such as automatically transferring small amounts into a savings account or rounding up purchases, you make the best financial decision effortless.

Lessons from the SMarT Program

In the 1990s, behavioral economists Richard Thaler and Shlomo Benartzi revolutionized savings behavior with their Save More Tomorrow (SMarT) program. By addressing these psychological barriers, they created a system that made saving intuitive and automatic.

One of the program’s key strategies was leveraging commitment and consistency. Participants were invited to commit to small, incremental increases in their savings rate, starting with just a modest amount. This approach reduced the friction of getting started, as the initial ask felt manageable. As users stuck with their commitments, their savings grew, and the momentum carried them forward.

Another breakthrough was the program’s use of incremental defaults. Instead of requiring participants to actively decide to save more, the SMarT program automatically increased their savings rate each year, typically in line with pay raises. This gradual approach minimized the feeling of loss, as users didn’t perceive themselves as sacrificing current spending.

Perhaps the most subtle yet powerful element of the program was its respect for autonomy. Participants could opt out of the program at any time, which reduced resistance and built trust. Interestingly, because the design was so user-friendly and the benefits were clear, most participants chose to stay enrolled.

The results were remarkable: savings rates increased from an average of 3.5% to 13.6% over just a few years. The SMarT program’s success highlights how thoughtful design, rooted in an understanding of human psychology, can drive meaningful change.

Designing for financial empowerment

The principles behind the SMarT program provide a blueprint for product managers and designers looking to create tools that help users save. Consider the power of making saving the default option in your financial product. For instance, an app could automatically transfer a small percentage of each paycheck into a savings account or round up purchases to the nearest dollar, depositing the difference. These small actions add up over time, turning inertia into an ally.

Visualization is another critical tool. Progress tracking, such as charts or graphs showing how savings grow over time, can be incredibly motivating. People are drawn to visible progress—it creates a sense of accomplishment and keeps them engaged. Imagine a user checking their app and seeing a graph that climbs steadily toward their dream goal.

Social dynamics can also play a role. Friendly competition or social proof can inspire users to save more. For example, showcasing anonymized data about how similar users are saving—or introducing challenges like a “30-day savings streak”—taps into our natural desire to keep up with peers.

Simplicity matters, too. Financial tools often overwhelm users with jargon and complexity, which creates resistance. By designing clean, intuitive interfaces and communicating in plain language, you make saving accessible to everyone. A savings tool should feel like a trusted guide, not an intimidating maze.

A narrative of possibility

The thread that ties these strategies together is the idea of turning an abstract future into a vivid, desirable reality. Saving isn’t just about dollars and cents—it’s about creating a life users can envision, whether that means traveling the world, enjoying financial security, or simply knowing they’re prepared for the unexpected.

As a product manager or designer, your role is to craft experiences that help users rewrite their financial story. By understanding the psychological barriers to saving and designing solutions that align with human behavior, you can empower users to achieve their goals.

The tools you create don’t just manage money — they shape lives. And when you help users save more tomorrow, you’re giving them the freedom to dream bigger today.