The ability to save money is determined by the side of the brain you think with, according to research carried out by First Direct bank.
It found that those who gave right-side of the brain responses (typically creative and impulsive types), have a more carefree ‘live for today’ attitude, and therefore are more likely to have credit card debts and little or no savings.
But deeper thinkers, who responded using the left-side of the brain â€“ careful and logical types â€“ are far more comfortable managing their finances, it emerged.
The study was carried out at Hertfordshire University by psychologist and author of Sheconomics, Professor Karen Pine. This Youtube video shows Professor Pine explaining more:
Professor Pine began the experiment by asking 500 adults a brain-teaser compiled by US-based scientists.
Reflectors & Intuitors
She examined their answers and found that only one in three people got the answer right; these people were ‘reflectors’ – who think with the left-side of the brain.
Most of the people got the question wrong; these were ‘intuitors’, people who tend to use the right-side of the brain.
When participants who gave the wrong answer were asked about their money, it was found they had fewer savings, credit card debt and a lax attitude to money management.
Professor Pine, said: ”Reactive people can’t suppress the first answer that springs to mind. They’re the kind of people who live for the moment and avoid putting effort into anything that doesn’t bring short-term gain. This can be linked to poor money management, such as only making the minimum repayment on a credit card.
”Intuitors might feel dissatisfied with their bank, too, but don’t change it.
”This is irrational given how much choice there is now and the cash incentives for switching.For instance, customers moving to a first direct account will receive Â£100 for switching, but if theyâ€™re not completely satisfied they can choose to leave the bank and receive a further Â£100 for their trouble.”
The following question was used to kick-start the study:
A notepad and pen together cost Â£1.10.
The notepad costs Â£1.00 more than the pen.
How much does the pen cost?
The results showed 64 per cent of people got the answer wrong, with most opting for 10p.
The answer is in fact 5p because the notepad costs Â£1.00 more than the pen. So the notepad costs Â£1.05 and the pen 5p, together they cost Â£1.10.
People who gave the right answer are ‘reflectors’. They use careful, logical thinking; a style linked to left-brain processes.
The report of the study also showed 43 per cent of ‘intuitors’ had been with the same bank since leaving school. For some this was 30 years ago or longer.
Why side of the brain do you use?
Here are the other questions used – answer them yourself and see if you think with the left or right side of your brain. Does it relate to the findings in this study?
– Question: If it takes 5 machines 5 minutes to make 5 widgets, how long would it take 100 machines to make 100 widgets?
-Â 100 minutes
-Â 50 minutes
-Â 5 minutes
-Â Answer: 5 minutes.Â Â With 5 machines used to make 5 and 100 machines used to make 100 the time required would remain the same.
– Question: In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half of the lake?
-Â 24 days
-Â 30 days
-Â 47 days
-Â Answer: 47 days.Â Â On day 47 the lake would be half covered then the lilies would double in size to cover the whole lake on the next day.
Top Tips For Intuitors
For those who find they are intuitors, Professor Pine has compiled 5 tips to avoid falling foul of the common traps and to develop a more reflective style of money management:
- Use a spending diary to track everything you spend for a week, however small. This will highlight your spending habits and any money leaks.
- Have separate accounts for savings, bills and spending. Arrange direct debits to put a set amount into each account every month and to pay bills.
- Allocate one evening a month to managing your personal finances. Use this time to check your statements, the status of your accounts and to see where changes are needed.
- Shop around for the best deals on utilities, banking and major purchases. Weigh up all the pros and cons and give yourself a cooling off period before making a decision.
- If you have investments, donâ€™t monitor them more than twice a year or youâ€™ll over-react to every blip in the market
Here are some more findings from the research:
The statistics for the differences in money styles between the two types of thinkers revealed:
- 66% of reflectors pay off their credit card balance in full every month (43% of intuitors do)
- Twice as many intuitors pay off only the minimum on their credit card
- Almost one in four reflectors have changed where they bank at least twice (43% of intuitors have never changed banks)
- 87% of reflectors have money in savings (70% of intuitors do)
When looking overall at peopleâ€™s behaviour with money, the survey revealed that:
- 1 in 3 people over the age of 55 have always been with the same bank
- Only 1 in 5 young people (18-25) pay off their credit card balance in full every month
- Men are more likely than women to pay off their credit card in full each month (63% vs 48%)
- 1 in 3 young people (18 â€“ 25) have no savings (i.e. for non-retirement or emergency purposes)
- 1 in 4 people aged 25-55 have no savings
- Most (92%) over 55s have savings
photo credit: Digital Sextant