my two cents

The Case for Having Tightwad Friends

Photo: H. Armstrong Roberts/Getty Images

Do you ever compare yourself to someone more savvy, self-disciplined, and generally on top of their money than you, even though you know it’ll make you feel like a wasteful idiot? Rest assured that the person you’re measuring yourself against is doing the exact same thing (although probably against someone else — sorry). Psychologists have a name for this universal human tendency: It’s called “upward social comparison,” also known as seeing how you stack up to those ahead of you in some way. And yeah, it makes most people feel bad. As Theodore Roosevelt put it, “Comparison is the thief of joy.”

Money isn’t always a metric for social comparison, but it’s often hovering in the background. Not that you’d even realize it. “We engage in upward social comparison all the time, but it’s usually an unconscious process,” says Martina Raue, a psychologist who studies decision-making at MIT. “Therefore, we usually don’t use it as a tool.”

But what if we could? That’s what Raue wanted to explore in a recent study where she told participants how their savings measured up to their peers. The results were interesting: When participants learned that their savings lagged behind that of other people similar to them, they decided to save more.

This might seem obvious: When you know you’re falling behind the pack, you pick up the pace. But in reality, that’s often not the case, especially when it comes to money.

Instead of striving harder, people who find out they’re saving less than others tend to bury their heads in the sand. In a 2015 study, a group of employees who had not signed up for a companywide savings plan were given a letter encouraging them to do so. That same letter explained how many other people at the company had signed up and urged the nonparticipants to follow suit. But the approach backfired. Researchers concluded that the comparison may have made people feel embarrassed and overwhelmed by their lack of savings and therefore less likely to bother taking steps to save even a little bit, even if they could probably afford to. “The study showed that social comparison doesn’t work,” says Raue. “People were discouraged by it.”

So why, in Raue’s study, did upward social comparison have such a positive impact on participants’ savings if other research shows that it doesn’t? It’s hard to know for sure, Raue says, but she believes it was partly to do with the way the comparisons were presented. The participants in her study were simply given information about how they were doing, savings-wise, relative to other people similar to them. (The researchers were also careful to make that information appear cheerful and nonthreatening — they even put smiley faces on the materials.) In the other study, the company employees were given a clear directive (“You should sign up for this savings plan”) and made to feel excluded from a smarter, better group that had already done it. They may have assumed that the superior group was made up of higher-paid employees — people who were not so much like them by some standards.

The takeaway, then, is that upward social comparison works best when you’re looking at people who aren’t that different from you — ideally similar in age, income, and walks of life (friends, colleagues, family members, random people on the internet who you can relate to). “If you know that someone else is saving a little more than you — not a lot — then it can motivate you to moderate your behavior instead of discourage you,” says Raue. These people aren’t role models, exactly; they should feel accessible, not on a pedestal. I like to visualize them as sort of a human Pinterest board of habits and accomplishments (cooking at home more, joining a food co-op, figuring out that elusive capsule wardrobe) that I’d like to crib in some way. The upward social comparison is implied, of course. But once I muck past the self-judgy aspect that tells me what a profligate slob I am, I can focus more on stealing their best practices and less on how I don’t have them yet.

That probably sounds idealistic and vague, and deeply annoying for people who truly struggle to save. So here’s some more concrete advice: Look at your friends who are thriftier than you, but still near the level of your financial playing field, and talk to them about money. “Discussing finances a little more openly would help you get a better idea of how well you’re doing, and research shows that it’s helpful for people to share savings goals with their friends and check in with them,” says Raue. “There’s no need to share numbers. Talking about these topics creates an opportunity to be open about your struggles and experiences and also exchange advice. A lot of people in our focus groups have found it helpful.”

In the end, shoehorning yourself into a pecking order of who saves better isn’t the point. Getting more information about how you’re doing with your finances, in a friendly environment, just sounds more appealing than getting slapped with a bad grade on your savings — which will make you more likely to keep checking back in. Financial services are hitching their carts to this idea, too. Rather than telling you what you’re doing wrong, online financial-planning tool Ellevest provides upbeat recommendations and nudges about your savings based on what’s realistic for your income, debt, and monthly expenses. Raue says that some bank websites are testing out charts that show you how your savings looks compared to others with a similar cash flow.

Self-comparison may not always work, but since you’re going to do it anyway, try to use it to your advantage. “We’re always trying figure out how to get people to save more, and we don’t have a straightforward answer yet,” Raue adds. “But we are getting closer to figuring out what helps.”

The Case For Having Tightwad Friends