Your brain is a traitor, trick it to save more!

Don’t fall prey to the “intention-action gap”

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From the April 2016 issue of the magazine.

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TrainYourInvestingBrain7So you’re trying to sock away some extra cash, but the little man upstairs keeps on telling you to spend it. Don’t worry, science says it’s not your fault—you’re merely falling prey to the “intention-action gap,” in which a long-term savings goal gets derailed by short-term gratification.

But behavioural economist Dan Ariely has a simple method for convincing your brain to do the right thing: Open a separate account for your money goal—and name it. Not only are we less likely to neglect an account that’s specifically earmarked for an important purpose, we’re more likely to actually achieve that goal. Ariely points to studies showing that when you open an RESP, your child is more likely to go to college.

Always mind the gap.

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