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Personality Influences Financial Savings

Personality Influences Financial Savings

A new study suggests extroverted populations should be vigilant toward managing their bank accounts because extroverts tend to have lower savings rates.

Jacob Hirsh, a University of Toronto management professor, says the research topic stemmed from his interest in how personality affects decision-making. In the study, Hirsh shifted his focus from studying individuals to looking at personality effects across entire populations.

“Many of the choices that people make are influenced by their personality characteristics,” Hirsh said. “I started to think about how that affect might play out across larger groups.”

In his previous work, Hirsh has shown that more extroverted individuals tend to choose smaller but immediate rewards instead of larger but delayed ones.

“Extroverts are far more sensitive to rewards, which makes it harder for them to overcome their desire for immediate gratification,” said Hirsh. “When making financial decisions, this can contribute to impulsive spending, higher credit card debts, and reduced savings.”

Therefore, if personality traits are related to individual saving behavior, what would happen when entire populations differ in their personality characteristics? As found in a paper that appears in the journal Personality and Individual Differences, Hirsh examined this question using three different data sets.

In the first study, Hirsh found a correlation between United States extroversion levels and changes in the personal savings rate over time. During the same period that U.S. savings rates underwent a sharp decline, there was a corresponding increase in U.S. extroversion levels.

In a second study, Hirsh found that U.S. states with higher average extroversion levels tended to allocate more of their income toward immediate consumption, rather than setting money aside for saving.

A final study examined how the average extroversion levels of different countries were related to gross national savings as a percentage of GDP (gross domestic product).

“Across all three different analyses, the same pattern emerged,” Hirsh said.

“The more extroverted the population, the lower the savings rates tended to be, even when controlling for population differences in age, life expectancy, and wealth.”

Although the pattern was consistent across studies, Hirsh cautions that correlation does not guarantee causation.

“We can’t be certain about the direction of causality here,” he said, “but to the extent that aggregate savings reflect individual choices, there is reason to think that personality traits can indeed have a causal influence.”

Experts believe this knowledge is profound as personality psychology can contribute to an understanding of financial decision-making and economic behavior.

“We know that personality traits have a powerful influence on an individual’s life outcomes,” said Hirsh.

“We are only beginning to understand the broader social and economic consequences of these personality differences.”

Source: University of Toronto
Woman excited about shopping at the mall photo by shutterstock.

Personality Influences Financial Savings

Rick Nauert PhD

Rick Nauert, PhDDr. Rick Nauert has over 25 years experience in clinical, administrative and academic healthcare. He is currently an associate professor for Rocky Mountain University of Health Professionals doctoral program in health promotion and wellness. Dr. Nauert began his career as a clinical physical therapist and served as a regional manager for a publicly traded multidisciplinary rehabilitation agency for 12 years. He has masters degrees in health-fitness management and healthcare administration and a doctoral degree from The University of Texas at Austin focused on health care informatics, health administration, health education and health policy. His research efforts included the area of telehealth with a specialty in disease management.

APA Reference
Nauert PhD, R. (2018). Personality Influences Financial Savings. Psych Central. Retrieved on November 30, 2020, from
Scientifically Reviewed
Last updated: 8 Aug 2018 (Originally: 31 Jul 2015)
Last reviewed: By a member of our scientific advisory board on 8 Aug 2018
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