Don't save your money, just delay spending it

Liz Koh.

Let's face it, the word 'save' falls in the same category as diet and exercise. It's one of those things that most people would like to do, but not now. One day. And even then, it's something you might attempt but give up on.

The word 'spend' sounds so much better! Somehow the word 'save' seems to imply going without, living frugally, not enjoying life to the full and buying cheap, low-quality things. It means hunting for hours to find the lowest price, and so on. Because it has all those negative associations, it's not something we want to do.

One of the ways to trick your brain into giving 'saving' a positive meaning is to reframe it. So instead of using the term 'saving', talk about 'spending later', which is exactly what saving is. There is a perception that money saved is untouchable, that somehow it disappears into a dark vault never to be seen again, causing the saver to be deprived.

Saving means going without now. Spending later means enjoying more than you have now, but later.

There is a famous Stanford University experiment, commonly called the marshmallow experiment, where small children were left in a room with a marshmallow. They were told that, if they ate it immediately they would get no more; but, if they waited a few minutes, they could have two.

These children were followed through adulthood and it was found that those children who had resisted temptation achieved more success in life than the ones who didn't. Saving is just delayed gratification.

Of course, gratification can't be delayed forever. The key challenge is to get the right balance between spending now, spending a little bit later, or spending a lot later.

- Liz Koh is an authorised financial adviser. The advice given is general and does not constitute specific advice. A disclosure statement is free. Call 0800 273 847. For free e-books, see moneymax.co.nz and moneymaxcoach.com.