Saving money is one of the most fundamental aspects of personal finance, yet for many people, it’s also one of the hardest habits to develop. Despite knowing that saving is important, a lot of individuals in Malaysia and Singapore struggle to put money aside consistently. Why? The answer lies in psychology.
Understanding the mental and emotional factors behind our financial behaviors can help us take better control of our money. Here’s a closer look at the psychology of saving—and how you can harness it to build better financial habits.
1. Instant Gratification vs. Delayed Rewards
Humans are wired to seek immediate pleasure. This is known as instant gratification, and it often overrides our long-term goals. When faced with the choice between buying a new gadget now or saving for a future house, the short-term reward can feel more appealing—even if it’s less beneficial.
How to overcome it:
- Visualize your goals: Put a picture of your dream home or vacation where you can see it daily. This strengthens your connection to the long-term reward.
- Automate savings: Set up automatic transfers to your savings account right after payday so you’re not tempted to spend first.
2. The Pain of Paying
Interestingly, we feel emotional discomfort when we part with money. But the level of this discomfort varies based on how we pay. Using cash often feels more “painful” than tapping a credit card or using e-wallets like Touch ‘n Go or GrabPay.
How to overcome it:
- Track your spending manually: Logging expenses—even digital ones—makes you more aware and more likely to think twice before spending.
- Use cash for discretionary spending: Allocate a weekly cash budget for things like dining out or shopping to create more awareness.
3. Loss Aversion
People generally fear loss more than they value gains. This concept, known as loss aversion, can discourage saving if we associate it with restriction or missing out on lifestyle pleasures.
How to overcome it:
- Reframe saving as a gain: Instead of focusing on what you’re giving up, think of savings as buying you freedom, security, or peace of mind.
- Reward yourself: Set milestones and small rewards along the way (e.g., a movie night after hitting your first RM1,000/S$1,000 saved).
4. Financial Insecurity and Avoidance
Some people avoid saving because thinking about money triggers anxiety, especially if they feel they don’t earn enough. This leads to procrastination or denial, which only worsens the issue over time.
How to overcome it:
- Start small: Even RM10 or S$10 a week counts. Starting small makes saving feel achievable and less intimidating.
- Seek support: Join online finance communities or use budgeting apps that can help break the taboo and provide guidance.
5. Social Pressure and Comparison
Social media has made it easy to compare ourselves with others. Seeing peers post luxury vacations, new cars, or expensive meals can create a feeling of needing to “keep up”—which often leads to impulsive spending rather than saving.
How to overcome it:
- Focus on your values: Remind yourself that financial goals differ from person to person.
- Curate your feed: Follow personal finance accounts that promote saving and mindful spending instead of consumerism.
6. Future Discounting
Known as temporal discounting, this psychological tendency leads us to undervalue rewards in the future. In other words, we think future benefits aren’t worth sacrificing for today.
How to overcome it:
- Use short-term goals: Break big goals (like retirement) into smaller ones (like saving RM500 this month).
- Set deadlines: Giving your goal a timeline creates urgency and keeps motivation high.
Saving money isn’t just a financial act—it’s a psychological one. By understanding how your mind works, you can design strategies that align with your behavior instead of fighting it. Whether it’s automating your savings, setting visual goals, or managing emotional triggers, small changes can lead to big results.
The key is to be kind to yourself, stay consistent, and celebrate the wins—no matter how small.
