Psychology of saving
Someone offers you £100 today, or £200 in the future. What?s the longest you?d wait for the extra money to compensate for the delay in getting the cash?
A typical answer, says Paul Webley, professor of economic psychology at Exeter university, is four months. Webley was speaking at a lunch in London hosted by the Communication Workers Friendly Society, which provides savings and insurance plans for those on low incomes.
?We have a savings crisis,? Webley says. ?Since the 1960s, it has been established as a simple psychological fact that people set out to save a certain amount and save less.?
That most people will take money now rather than wait for twice as much shows savers put present needs above future security. Also, saving depends on predicting the future, and above all on self-control.
A possible solution, says Webley, would be mandatory savings schemes like workplace pension plans, with an opt-out for people who don?t want to take part. ?People follow the path of least resistance,? he said. ?There is striking evidence from the US that if you make saving the standard option, people will save.?