Sense of power makes you save more money
Feeling powerful increases saving, even if there is only a small increase in the sense of power. The reason: money in the bank gives you a feeling of prosperity and power – and you want to keep feeling that way. As soon as people know that they will be able to maintain their sense of power or that other sources, such as knowledge, increase their sense of power, their tendency to save decreases. The fear to lose power stimulates saving behavior. This is shown by research conducted by Anne-Kathrin Klesse of Tilburg University, carried out in cooperation with Emily Garbinsky and Jennifer Aaker of Stanford Graduate School of Business.
Earlier research has shown that feeling power mainly has negative consequences. On the basis of five experiments, however, the researchers have shown that this feeling can also have positive effects. “One of them is that people save more when they feel powerful,” says Klesse. “Subtle things, like sitting in a chair that is higher than that of the person you are talking to or going back in your mind to a situation in which you felt powerful are enough to get you to save more. Not only banks or financial advisers can benefit from these insights, but also the savers themselves. Our advice to people is to make sure they are feeling powerful before they make a decision on how much money they want to save.”
Powerful thoughts
In the first experiment, the researchers divided 140 Dutch students into three groups: one group was asked to write a text about a period in which they had felt powerful and the second group was asked to write about a period in which they had felt powerless. The control group was not given a writing assignment. All students were then asked to imagine they had just received 100 euros and to state what amount of this they were willing to save. The first group of students proved to be willing to save the most: on average, they saved € 71.20, compared to € 48.73 by those who had written about powerlessness and € 51.69 for those in the control group.
Higher chair
The impact of power on actual saving behavior was tested in the second experiment. 76 Students from Stanford University were given $ 10 to report to a lab and to provide feedback on how this lab functioned. Participants were escorted to a room and given a seat on a tall chair or a low one (an ottoman); the interviewer took the other seat. As part of the interview, they were given the choice of directly receiving their $ 10 or to put the money into a savings account against a high interest rate. Then they filled out a questionnaire, indicating, among other things, how powerful they had felt during the interview. Those who had sat in the higher chair, reported higher levels of feeling powerful that those who had sat on the ottoman. Those who had felt more powerful also saved more: $ 6.94 of the $ 10 as against the $ 4.49 that was the average for the powerless participants.
Group leader
In the third experiment, the researchers asked more than 200 members of the crowdsourcing website Mechanical Turk to imagine a situation in which they were either the group leader managing a project or a member of the project group. Some of the participants were not given saving instructions, others were told they could save for the future. In both scenarios, those who felt powerful saved more (42% and 34%, respectively) than those who had felt powerless (13% and 18%, respectively). However when they heard that they would be saving towards a BMW, 23% of the powerless participants were willing to save, as against 13% of the powerful participants. “This shows that people who feel powerless are led by thoughts of what others think of them. One way to influence this perspective is to spend money on a status symbol,” Klesse says.
Other power sources
The other two experiments show that the effect of power on saving disappears as soon as money in the bank no longer reflects (more) power. If knowledge is the source of power, people who feel powerful save as much as those who feel powerless. This also holds for people with lifelong contracts. “If saving money no longer helps you to retain your powerful position because it is already secure or if knowledge is the power source, the effect of power on saving evaporates,” says Klesse.
The paper “Money in the Bank: Feeling Powerful Increases Saving” will be published in the Journal of Consumer Research in October 2014.