Sometimes people talk a lot, but don't do anything. Studies show that talking about money may help you save more.


Chinese girl with mother

Talking about money may have a greater impact on your saving money than you thought. Linguists debate whether language structure affects how people think about things, or if people’s thoughts help to form language. Keith Chen, Associate Professor of Economics at the Yale School of Management, posits that language affects the way we perceive the future, and this, in turn, affects the way we save money.

When I spoke with Professor Chen on my radio show, Goldstein on Gelt, he told me that if you look around the world, you will find that people in different countries save their money in different ways. Professor Chen attributes these distinctive saving patterns to language. He discovered that around ten percent of the world’s languages have no systematic future tense. Speakers of these languages (i.e., Chinese and Finnish) are forced to talk about the future in exactly the same way that they talk about the present.

How does this affect the way that people save their money?

Professor Chen noted that in the countries where these languages are spoken, people tend to save more. The reason for this is that those who look at the future in the same way that they see the present find it much easier to visualize what may happen. Both present and future feel immediate, and this makes it much easier to save. On the other hand, people whose language encourages them to disassociate the future from the present have a very difficult time saving.

From this, it appears that one of the best ways to save money is to try to speak about the future with the same immediacy as you think about the present. Just like you need to pay your bills today, you will need to pay them post-retirement. Perhaps this is why people who have written financial plans are better savers than those without set plans; having something concrete enables them to feel the immediacy of the future, and they are encouraged to prepare for it.

To find out more about how learning Chinese and language in general affects your thought processes and financial behavior, watch this video of my interview with Professor Chen.

(The opinions expressed on the Goldstein on Gelt show are those of the guest, and not necessarily my opinion or the opinion of Portfolio Resources Groups, Inc.)

 Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.