Thinking Money Over the Holidays

The PBS documentary Thinking Money: The Psychology Behind Our Best and Worst Financial Decisions probably won’t take root as a holiday tradition like gathering the family round to watch It’s a Wonderful Life. But it’s sure to be a worthwhile reprieve from binge-watching A Christmas Story and other holiday TV classics. For more information on when Thinking Money is airing and to watch short clips from the show, check out this website.

>> Discussion: What would you do with a sudden windfall of money?

Thinking about moneyThinking Money is an intriguing scientific look at our attitudes and behavior when it comes to earning, spending and saving. The money lessons you’ll learn will serve you well throughout the year, but particularly during the holiday season, when spending can easily escalate from “celebratory” and “generous” to “What the heck was I thinking?!” And when preparing financial resolutions for the New Year, watching Thinking Money will make it all that much easier.

Thinking Money examines the relationship between “classical economics” or “rational economics” (e.g., “I know I need to save for my college fund”) and “behavioral economics” (“I can’t possibly save any money for college this month because that sale on Xboxes isn’t going to last forever!”)

Understanding what’s going on in your brain when you make an impulse purchase, or choose one product over another, or decide to save rather than spend, is not only fascinating but also will help you make rational financial decisions even when part of your brain is steering you in a not-so-rational direction.

For example, one of the studies highlighted in Thinking Money shows that study participants who consciously visualized and thought about themselves growing older (in this case with the assistance of specialized aging simulation goggles) said that they’d set aside about twice as much money for retirement than those who didn’t participate in the aging visualization exercise. Out of sight, out of mind, I guess.

After watching Thinking Money, take a couple of minutes more to tune in to my weekly AARP YouTube show, The Cheap Life. In our newest episode (below) I talk money, answering questions from viewers about topics from the advisability of maintaining an old-fashioned savings account to what I’d do with a surprise inheritance if one landed on my doorstep.

>> Get discounts on financial services with your AARP Member Advantages.

So don’t be a Scrooge this holiday season, but do remember that the true joy of this season really has nothing to do with shopping or spending money. As the Grinch himself discovered in Dr. Seuss’s How the Grinch Stole Christmas!, “Then the Grinch thought of something he hadn’t before! What if Christmas, he thought, doesn’t come from a store. What if Christmas … perhaps … means a little bit more!”

Photo: nito100/iStock

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2Papa 5pts

Try to confine your gift buying to dollar stores for big savings.

goldye 5pts

Jeff, I don't need to watch the PBS documentary because we're a very frugal couple to begin with.  I spent 13 yrs. working at 2 Staples stores in my area so I'm an expert at consumer shopping behavior. 

1.  Self employed/independent contractors - their shopping behavior is weak because most purchases can be itemized on their IRS 1040 as business expenses and their goal is to reduce income to lower their tax bracket.  The more expenses they incur, the lower the tax bracket.

2.  The guilty working parent - these parents are impulse buyers to reduce the guilt they feel by not spending more time with their kids.  I don't have a survey to prove it, but I can bet that stay at home parents spend far less than working parents due to the fact they have far less money but also because of the time spent with their kids.

3. Retail employees - honestly, just because you work in retail doesn't mean you have to buy anything in the store.  Managers & clerks don't earn high enough salaries to frivolously spend just because it's on clearance or it's a "must have" item.  These are the same people struggling to pay off student loans.

As for changing consumer behavior (getting people to save more), the difficulty is American economy is based on consumer spending and marketing is a huge industry whose sole purpose is to alter our psyche into living for today and forget the future. The difficulty is Americans don't hear the consequences of not saving for retirement as much as they hear about the latest iphone.  One is boring while the other is "cool".  I know from 1st hand experience that it's difficult to teach young adults that saving now for the next 40 yrs. will secure their retirement.  We need to teach young adults they need to give up immediate pleasures to secure their future.