You Should Be Suspicious If Your Checking Account Makes You Happy

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Photo: H. Armstrong Roberts/ClassicStock/Getty Images

One of the more frustrating truths you discover on the road to becoming financially literate is that your checking account is not your friend. Beyond having a buffer there to fall back on in case of calamity — the amount of which it’s best to talk to a financial adviser about — excess thousands are, relatively speaking, a waste, since the day-by-day inflation is making them worth less. That’s why, bankers say, as much money as possible should be employed in mutual funds and such other financial instruments. Yet, according to research highlighted by The Wall Street Journal this week, this conventional wisdom doesn’t exactly feel good.

The Journal talked with Joe Gladston, University of Cambridge researcher and co-author of the paper in question. The study, publishing in the journal Emotion, found that for 585 anonymized British bank-account customers, feelings of financial well-being and life satisfaction were more associated with stockpiling money in their bank account than with their overall wealth. Even for rich customers, having more cash in the checking account was associated with greater happiness. “It is just a correlational study, so we don’t study the reasons for this,” Gladston told the Journal. “But we can hypothesize that when money is tied up in a pension or investments, it feels more abstract and inaccessible. Going to the ATM and seeing a large balance available feels more important to people.”

It makes all sorts of sense: Humans, being embodied creatures, have a well-known disposition to things they can feel like they can get their hands on. Harvard linguist Stephen Pinker wrote a whole book about how the best writing is “concrete,” or oriented around describing objects in the world rather than wandering around in abstraction. “Forcing yourself to describe things in concrete terms is a way of undoing your own idiosyncratic accumulation of abstractions,” Pinker told me in an interview, “and to present things on the common ground that you’re likely to share with readers. If I’m a psychologist and I say ‘the infants were presented with a stimulus,’ my fellow psychologists might know what that means, but if I say ‘I showed Big Bird to a baby,’ everyone knows what Big Bird means.”

The same discomfort with abstraction seems to be at work here: It looks like everybody can relate to seeing their checking account get bigger — but not so much when that dough goes into investments. But if you want the old-person version of you to be well-off, it’s crucial to invest now, even if it’s uncomfortable.

Be Suspicious If Your Checking Account Makes You Happy