Keep Your Money
Original post from September 8, 2014 on Medium.
Everyone knows that spending $3 on a cup of coffee (or $14 on a cocktail or $25 on a new shirt) will mean you can’t use that money towards a larger purchase later. The whole concept of saving-up for something requires that you resist spending money on every whim and fancy and instead keep the money for what you really want, be it a new car, a trip with friends, or simply a nice new pair of headphones. But having that kind of discipline is hard, especially when the small purchase gives us such immediate pleasure and gratification.
Saving for an Ice Cream Sundae
The famous marshmallow experiment at Stanford University studied immediate vs. delayed gratification in small children. The kids in the experiment were presented with one marshmallow and told that they could either eat the treat now or wait alone (with the marshmallow) for 15 minutes until the researcher returned with a second marshmallow. Even with this very simple choice two out of three of the children in the study ate the marshmallow before the researcher returned. In a follow up study it was found that the kids who were able to delay gratification and wait for the second marshmallow were much more successful later in life than the kids who were unable to wait. The ability to sacrifice now in order to be rewarded later has a profound impact on the trajectory of our lives, and a very noticeable effect on our ability to save money.
— Click here for a TED talk on this experiment. —
When it comes to money it becomes even more difficult to think about the long term since it is not a simple matter of not eating one marshmallow in order to get two. It’s more like denying yourself one marshmallow over and over again until you’ve finally not eaten a whole bag and then trading the bag of marshmallows for a gigantic ice cream sundae.
The Problem with Friends
With 20-somethings in particular there is another factor that makes saving money especially hard: friends. Getting a cocktail means 14 fewer dollars for that beautiful guitar you’ve had your eye on, but the drink sure does look delicious and all your friends are getting one so it would be weird not to, right? Thus for yet another evening you choose the drink and forget about any larger ambitions.
Deliberately choosing to not spend money sometimes feels pretty horrible; your friends look at you funny for not getting a drink when out at the bar, cooking at home can be way more of a pain than ordering take out, and saying no to fashionable clothes that look great on you can be depressing. Usually there is no one around to give you a pat on the back and tell you that saving money on that small purchase was a good thing. And even though you know that you have made some good spending decisions in the past it becomes difficult to remember all those decisions and notice the small changes in your bank account over time. It is easy to get discouraged, start thinking you will never have enough money for your dream, and begin splurging on coffee, dinner out, and expensive drinks because you might as well have some fun with your hard earned cash.
A Possible Solution
I work for a tech company interested in helping people take control of their financial lives. Currently, I am part of a small team of 20-somethings taking a look at this problem of trying to delay gratification in our financial lives. After some customer research and many long brainstorming sessions we came up with the idea for Keep, an iPhone app where you record when you choose to keep your money for a larger goal instead of spending it on small, everyday items.
Keep is a financial app without the finances. Unlike other financial applications it doesn’t connect to your bank account or show depressing red info graphics indicating that you need to budget more. Instead, Keep is designed to help you feel good about saving money. With Keep you don’t track what you spend, you track what you save. Skipped Starbucks for a week? Track that. Took the bus instead of a taxi? Track that, too. Over time you can see the good decisions add up and when you reach your goal you can use the money for that weekend road trip without feeling the slightest bit guilty.
Finance apps tend to be utilitarian and cumbersome to use, not to mention the tone is often very negative. With Keep we try to create an experience where users can have fun and feel great about their choices.