One of the typical promises of the whole world when the twelve chimes that announce the start of a new year sound is, this time, to save more . However, the year passes and they do not fulfill their purpose. Also some young couples are committed to cut their spending on leisure, clothing or technology to save for the entrance of the mortgage , but they do not either.
The time has come to be honest with ourselves. We do not keep our promises of savings and that makes us angry and frustrated. Why can not we save to achieve our goals? Is there any scientific explanation?
Unfortunately, there is no scientific reasoning to this problem, what there is is a theory known as ‘ the bias of the present’ which tries to explain why we prefer immediate versus future satisfaction. The forerunner of it is not just anyone, but Richard Thaler, the Nobel Laureate in 2017.
WHAT IS THE SESGO OF THE PRESENT?
According to this theory, people prefer the immediacy of reward . The motivation of a human being is profoundly affected by this immediacy, so that the more distant the reward, the harder it will be to strive to carry out that action that we want to execute. Saving is a good example.
Almost everyone asks for a loan to buy a new car . They could save for several years and pay for the car with the savings. The car would be cheaper if they did so and would not have to pay a monthly fee for several years. However, they sting in the loan.
The explanation is simple. With the loan everything is faster. They approve it in a couple of days and so they can enjoy the car before. The concessionaires have realized this and that is why they make financing. It is no longer necessary to go to the bank. If the dealer grants you the loan the terms are shortened and the reward will be even more immediate.
The same thing happens with retirement . Everyone knows that I should save to have a decent life when the time comes to stop working. But who does it? For someone in their mid-thirties, the reward of having extra money in 35 years is so far away that they see no reason to sacrifice themselves and start saving.
The bias of the present deceives us so that we spend today without thinking that there is a tomorrow . We underestimate the future consequences and we do not take action because we believe that day will never come. The only possible solution is to think less about the short term and more about the long term, but in order to achieve it, one must be more rational in making economic decisions