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Wanna save? Keep it simple, says Rotman paper.

September 28, 2011

TORONTO, ON – If one sav­ings goal is a good thing, two or more should be great, right?

Not real­ly. Those who want to save are more apt to keep sock­ing mon­ey away and more of it too, if they have just one goal in mind, shows work done in mul­ti­ple coun­tries by two researchers at the Uni­ver­si­ty of Toronto’s Rot­man School of Man­age­ment.

“If you have only one goal it puts you in a more action-ori­ent­ed mind­set and helps you save more,” says Min Zhao, an assis­tant pro­fes­sor of mar­ket­ing who co-authored the study with mar­ket­ing pro­fes­sor Dilip Soman. “Too much think­ing about which goal is more impor­tant keeps peo­ple from act­ing.”

The study looked at a range of dif­fer­ent research sub­jects, includ­ing mod­est house­holds in rur­al India, mid­dle-income Cana­di­an dads, and work­ing pro­fes­sion­als liv­ing in Hong Kong.

Results con­sis­tent­ly showed that a sin­gle sav­ings goal worked bet­ter than mul­ti­ple goals. Indi­vid­ual stud­ies also found sin­gle goals worked par­tic­u­lar­ly well when it was hard­er to save. Hav­ing mul­ti­ple goals result­ed in peo­ple think­ing about trade-offs between goals, rather than focus­ing on imple­ment­ing their sav­ings plan.

The find­ings sug­gest that finan­cial or sav­ings advi­sors may want to take a dif­fer­ent tack with their clients. Banks some­times adver­tise a list of rea­sons to save, but such a mes­sage could “back­fire” says the study, because that intro­duces mul­ti­ple goals, lead­ing to even­tu­al fail­ure in clients’ sav­ings plans.

“The most com­mon mis­take is to empha­size numer­ous rea­sons to save,” says Prof. Zhao. “They should revise their approach.”

Of course most of us have more than one thing we need to save for, such as retire­ment, a child’s edu­ca­tion and funds for a rainy day. In that case, Prof. Zhao sug­gests find­ing a way to inte­grate seem­ing­ly com­pet­ing goals into a sin­gle more abstract goal, such as achiev­ing finan­cial inde­pen­dence or flex­i­bil­i­ty.

The com­plete study is avail­able here.

For the lat­est think­ing on busi­ness, man­age­ment and eco­nom­ics from the Rot­man School of Man­age­ment, vis­it

The Rot­man School of Man­age­ment at the Uni­ver­si­ty of Toron­to is redesign­ing busi­ness edu­ca­tion for the 21st cen­tu­ry with a cur­ricu­lum based on Inte­gra­tive Think­ing. Locat­ed in the world’s most diverse city, the Rot­man School fos­ters a new way to think that enables the design of cre­ative busi­ness solu­tions.  The School is cur­rent­ly rais­ing $200 mil­lion to ensure Cana­da has the world-class busi­ness school it deserves. For more infor­ma­tion, vis­it


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Ken McGuf­fin
Man­ag­er, Media Rela­tions
Rot­man School of Man­age­ment
Uni­ver­si­ty of Toron­to
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