To save, spend cash

Consumers only pay money when they have to spend cash. So, if you want to save, store your credit card at home and bring cash with you only.

Priya Raghubir's research at the University of New York found what many financial planners already know: people buy their hands more when using credit cards than when they carry cash. People will also keep their wallet more tightly if they look carefully at the detailed list of their expenses.

In their four-part survey, Priya's group found consumers only paid money when they had to spread their cash.

In the first part, 114 participants had to predict how much they would spend if they used cash or a credit card for a meal in the restaurant described in detail. The result is "people are willing to pay more if they deduct from the credit card".

In the second test, 57 volunteers had to predict the cost of a Thanksgiving dinner, one by one, instead of looking at the overall bill. Meanwhile, the gap between paying by cash and paying by card is negligible.

In the third step, 28 participants were given a detailed view of the items to buy, with a gift card worth $ 50, or for $ 50. As a result, when holding cards, everyone buys more.

Finally, 130 volunteers were given 1 dollar of cash or a $ 1 gift card to buy candy. First, they are willing to spend more when holding cards compared to holding cash. But after holding that card for an hour, they became "more miserable", proving that the gift card gradually looked like real money.

"Research shows that indirect payments (such as credit cards) tend to be less of a cash and therefore people will spend more easily," the research team commented.

"I find that if a young person understands that saving a small amount each month on a credit card can make them a millionaire when they reach age 65, they will consider more carefully about using a credit card." , Doug Borkowski, director of the Department of Financial Counseling, Iowa State University, advised students in research.