There are optimists and there are pessimists. There are leaders and there are followers. And in the world of economics, there are savers and there are spenders.
What shapes our spending behavior? Is it too late to change it? The lessons of smart financial management are best taught early, but research is showing that the psychology of saving is much more complex than getting your first piggy bank as a child. The NC 529 Plan can help you get started!
The Brain-Budget Connection
So many people think that over-spenders were never taught the value of saving. It turns out that your brain chemistry may play a role as well. Researchers found that an area of the brain known as the insula can contribute to our spending or saving behavior. The insula is stimulated when you experience something unpleasant. Basically, the more stimulation in the insula, the less likely you are to keep doing what you’re doing. Knowing this, researchers scanned the brains of participants while they made financial decisions. Researchers concluded that those with more activity in their insula were more likely to be savers, while those with a less active insula were found to be spenders. Savers can feel real emotional pain when they spend. But if you identify as a spender and you don’t get that emotional high from contributing to savings, the NC 529 Plan’s options to contribute via automatic draft or payroll deduction may help you!
The “Present Bias”
There’s also the issue of “instant gratification.” When you look at a baby, college seems a very long way off. We can fall victim to what’s known as the “present bias.” We tend to think, “Why do today what we can put off until tomorrow!” The fact is, it’s never too early to begin saving. The sooner you start, the smaller the bite will be down the road. You can use the NC 529 Plan to help you set a goal and start contributing smaller amounts early to take advantage of the possible long-term earnings.
How do you decide how much you’ll need? The NC 529 Plan website offers you calculators and tools to help you make your college dream a reality. Whether you begin saving when your child is five years old or 15, it’s never too late to put a plan in place. NC529.org and the College Foundation of North Carolina have tools and expert advice that can help you plan how to pay for your higher education no matter where you are in the process.
The “Hassle” of Saving
Experts say another issue that keeps people from saving is the inconvenience factor. “Small hassles — like filling out a form — can keep us from doing important things,” according to Money magazine. Those same experts report good news though. Research has shown that automatically enrolling employees in retirement plans increases retirement savings. It’s the idea that if you don’t see it, you don’t miss it.
Similarly, the NC 529 Plan makes saving easier too! You can open your Account online in just a few minutes. After you open an Account, you can contribute by automatic draft, payroll deduction, check, or fund transfer. And anyone can contribute. Friends and family can also choose to donate to the fund. The NC 529 Plan also offers investors tax advantages. The NC 529 Plan works to make it easy for you to save for college.
So, if you’ve always been a spender and are ready to become a saver, take advantage of the tools that the NC 529 Plan offers to help with saving for college.