Is language a hurdle to investing?

Mary Kate Miller
May 14, 2018

We should all be saving money for retirement. The sooner you get started, the less you have to save (thank you compound interest) and the better off you will be in the long run. Still, it can be hard. Even knowing that you should be saving, most Americans aren’t putting enough away for retirement. We should be saving more money than we do in general. Saving and investing the money you save protects you from future uncertainty. It makes your money work for you, and it helps you do things like buy a house, create a nest egg for a rainy day, and retire comfortably (or maybe even early)! Even when we know this, we struggle to save for the future, and research suggests a surprising reason why.

No, it’s not a lack of proper adulting. A paper published by Kevin Chen in 2013 following his TED talk on the same topic suggests that language may play a huge roll in the way that we save. One verb tense, in particular, seems to make all the difference. In cultures where the language is without strong future tenses, people tend to take better care of their future selves. They save more money and they tend to smoke less. In languages like German, Japanese and Finnish, there isn’t a large distinction between the present tense and the future tense. In English, on the other hand, we use a strong future tense.

What does that sound like?

In English, it might sound like this, “I will go to the grocery store tomorrow.” In languages without a strong future tense, it’s more like “I go to the grocery store tomorrow.

In terms of thinking about our future selves, that might be, “I will retire at 65.” vs. “I retire at 65.” “I will need two million dollars saved to live comfortably in retirement” vs. “I need two million dollars saved to live comfortably in retirement.”

Chen was curious to see if people feel more connected to their future selves when they thought of it as equivalent to the present, grammatically. Remarkably, his research supports that theory. In countries with a weak future tense, people are 30 percent more likely to save money. It doesn't end there. They’re also 24 percent more likely to exercise regularly, 24 percent less likely to smoke, and 13 percent less likely to be obese.

What came first, the walk or the talk?

Chen concluded that language and saving might be a little bit of a chicken or the egg situation. Do Germans save more money because their language treats their future selves the same as their present selves? Or, is it that their language developed to reflect those values?

Regardless of whether it started because of a cultural value, or the value developed because of the English language, Chen’s research suggests that we are not set up for success when it comes to treating us as our future selves. So, start by forgiving yourself if you know you’re not saving as much as you should.

What can you do?

There has also been some interesting research into other ways we can make people feel more connected to their future selves. A 2008 study at Stanford University used Virtual Reality (VR) to see if they could affect participants retirement saving habits, and it worked. The group that participated in an immersive simulation as their future selves allocated significantly more money to their future selves than those who participated in the simulation as their present selves.

If you’re looking to recreate this study or try it out at home, there are a number of tools online that will take your photo and “age it.” It’s not perfect, but if you can stand the sight of these creepy “future you” photos it might be worth pulling it out when you’re making investment decisions.

How do you set yourself up for success?

Another way to get around the obstacle of language when it comes to savings is to make it something you don’t have to think about. Setting up recurring deposits is one of the best and most effective ways to go when it comes to savings, especially for retirement. Then, it’s not something you have to think about more than once. It gives you a steady way to invest your money. You don’t have to worry about saving big lump sums. You don’t have to decide to invest each month. It happens automatically. You can set an amount that you can comfortably afford, and it adds up. It saves you time, energy, and the mental gymnastics of marrying future-you with today-you.

You could try talking in the present tense anytime you talk about money, but honestly, recurring deposits just sound easier.

Mary Kate Miller
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