Australians take $31 billion from their savings each year
And a UBank experiment reveals that people change their mindset towards money after meeting their future self.
We are a nation of big spenders. We just can't resist dipping into our savings for impulse purchases and short-term rewards. New research by UBank released today reveals the extent of our spending habits and it's not pretty.
More than half of us (57%) dip into our savings regularly for ad-hoc purchases, amounting to a collective $2.6 billion a month and a staggering $31 billion each and every year. One-third of us say all our money is gone by pay day, which isn't particularly surprising considering that two-thirds of us (61%) are living without a savings plan. Even more worrying, more than a quarter of us admit to having a lot of debt and two million of us have less than $1,000 in savings.
We are prioritising short-term rewards
The UBank research suggests that people are taking the popular mantra "treat yourself" a little too seriously. Almost half (45%) of survey respondents admitted that their hard-earned money is often spent on items or experiences that make them happy in the short term.
Many of us have good intentions, with almost a quarter of Australians actively trying to save. However, the thrill of the immediate, short-term reward is proving to be a distraction too tempting to ignore.
UBank's Science of Spending and Saving Experiment
UBank recently conducted an experiment with Dr Phil Harris, who's an expert in consumer neuroscience, to understand the science behind the mentality of favouring spending over saving.
“We tested the hypothesis that so many Australians are favouring immediate rewards over long-term gains because they’re actually quite disconnected from their future selves,” said CEO of UBank Lee Hatton.
The experiment included 50 participants and tested their brains' responses to a series of common financial scenarios before and after being shown a digitally manipulated photo of their future self.
Image: Digitally manipulated photo of one participant's "future self". Source: UBank.
Meeting your "future self" can change your mindset towards money
"After interacting with visualisations of themselves later in life, 72% of participants shifted their mindset towards wanting to save rather than spend money," said Dr Harris.
“The experiment also found that when we measured brain activity after the participants had met their future selves, there was a 150% increase in attention paid to the moment of choice between saving cash versus spending it. This shows that while our natural default setting is to seek immediate reward, there is a way to train your brain to become financially smarter,” said Dr Harris.
With the insights of the experiment, UBank is now developing technology using artificial intelligence to help customers better plan for regular expenses, manage their daily spending and save more effectively. This technology will be available through UBank's Internet banking later this year.
Keen to get your savings on track? Start by comparing our range of high-interest savings accounts.
Image: Supplied by UBank.