Is there a science behind why we save and spend?

Are you a spender...?
How often do you shop online? Perhaps you feel a genuine rush of happiness or relief when you get to buy something you really like, understanding the phrase ‘retail therapy’ in its truest sense. And maybe you don’t have much money in your savings account, but wouldn’t get a kick out of it even if you did.

Or are you a saver…?
On the other hand, do you enjoy watching your bank balance go up, feeling safe, secure and in control of your life when you have surplus cash knocking around? Maybe you find yourself calculating how much money you’ll have saved 3, 6 or 12 months into the future, and perhaps you look forward to pay day so that you can top up your savings account a little bit more.

Whatever camp you fall into, there’s a strong scientific reason behind it. The way you manage money goes far beyond environmental factors, which is why it’s not a simple case of learning good money management skills as a child, or acting on common sense as an adult. Here’s why…

The science
Researchers have discovered that there’s a part of your brain called the insula, and that it’s responsible for our spending habits.

The insula is associated with several basic emotions, such as disgust, joy, anger, sadness and fear. When we experience something unpleasant, the insula becomes very active. The more the insula is stimulated, the more likely we are to stop doing what we’re doing.

So far as spending habits area concerned, the ‘pain’ (or guilt, or stress) of spending money can cause the insula to ‘light up’ with activity, making you want to spend less.

However, the brain also causes you to feel great pleasure: saving money (or even just getting a good deal on a bargain), makes you feel really good. We all feel this rush, but people who like to save money feel the rush of happiness even more.

Why? Well, it’s relief from the discomfort that the insula inflicts. So, people who have higher levels of activity in their insula tend to spend less and save more.

What does this mean for you?
If your brain doesn’t show much insula activity (and you therefore aren’t ‘wired’ to want to spend less, nor feel the full benefit of the pleasure of saving) you might have a hard time keeping your money in your account.

You might live from paycheque to paycheque, or find yourself needing to borrow money from time to time. But this isn’t necessarily a disaster: when repayments are planned and managed well, your type of ‘wiring’ might mean you don’t feel terribly stressed about paying off a loan.

What can you do?
If the insula of your brain doesn’t show much activity when it comes to spending, consider withdrawing cash from your bank account rather than paying on cards, and avoid anything where you’ll be running up a tab. Both of these measures will prevent you from accidentally overspending. You could also reward yourself if you meet savings goals. Just remember to keep one eye on the future to ensure you’re prepared for whatever comes your way.

But what about an over-active insula?
An over-active insula can be just as much of a problem as an under-active insula. If you feel stress or discomfort when spending money, or think you miss out on fun things in life because you’re too concerned about your bank balance, there are some steps you can take to have better spending habits.

For instance, tell people that you’re going to make an exciting purchase so that you’re more likely to actually go through with it. Give yourself little treats to reward healthy financial habits so that you start to place more value on the benefits of spending, and constantly challenge yourself to evaluate whether you’re going to miss out on a social event or life event.