The idea of “pay yourself first” is simple: on payday, send part of your money to savings before you start spending. The rest is yours for everyday life – guilt-free.
The experiment that changed pensions
Economists Richard Thaler (later a Nobel laureate) and Shlomo Benartzi designed Save More Tomorrow. Employees committed in advance that part of every future pay rise would automatically go to savings. The result: the average savings rate rose from 3.5% to 13.6% over 40 months.
People don’t change behaviour through willpower. They change it through settings.
Why automation beats willpower
Every “I’ll put some aside today” is a small fight with yourself. A standing order ends the fight: you decide once and then just live. Psychologists call it the power of the default.
- Set a standing order for the day after payday.
- Start small – even 5% is a win.
- With every pay rise, add half the difference.
- Keep savings in another account so they aren’t “at hand”.
In Fiplo you can set automatic deposits for your goals and see for each one when you’ll reach it at the current pace.
The articles are educational and are not financial or investment advice.