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See Inside July / August 2010

When I'm 64: Identification with 'Future Self' Helps with Successful Financial Habits

The closer people feel to their future selves, the more money they save



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How much money do you put away each month toward retirement? Maybe you sock away all you can, already dreaming of that Florida condo. Or maybe you can’t even imagine where you’ll be then, what you’ll want to use the money for, even what you’ll be like: when you think about yourself far in the future, it’s almost like thinking about someone else. A growing body of work suggests that the more you feel your future self is really you, the more you’ll put in his or her—whoops, your—bank account.

When making decisions, we often treat our future self the way we would treat another person, found a study in 2008 by Princeton psychologist Emily Pronin. People in the study often shied away from doing something helpful but unpleasant when they had to do it right at that moment. But when their help was needed a few months or a year down the line, they were more likely to sign up—just as likely as they were to suggest that someone else should help out.

Exactly how distant we feel from our future self varies from person to person, according to a 2008 study by psychologists Hal Ersner-Hershfield and Brian Knutson, then both at Stanford University. The researchers asked people to think about themselves now and in the future while scanning their brain with functional MRI. Previous studies showed that an area of the brain called the rostral anterior cingulate cortex is activated more when you think about yourself than when you think about another person; this study showed that it is also more active when you think about yourself now as compared with imagining yourself 10 years from now. Some people showed a smaller difference in activity, suggesting they saw their future self more as “me” than as “someone else.”

Each participant in the study then had to pick between getting some amount of money immediately or receiving a larger sum in a certain number of days. The subjects varied in how much extra cash they required to make the reward worth the wait. That variation, the study found, matched the brain scans. The people who showed a smaller difference in brain activity when thinking about their current and future self needed less money to make the wait worthwhile.

These individual differences affect financial decisions outside the lab, too. In their next study, published last year, Ersner-Hershfield and Knutson found that people who saw their current and future self as more alike had real-world financial assets that were worth more—even when the researchers accounted for factors such as age and education. As Knutson put it, “the more similar you report feeling to your future self, the more savings you report having in your bank account.”

Because those who feel identified with their future self make financial decisions with long-term benefits, Ersner-Hershfield says, encouraging people to imagine themselves in the future might help them save more. “Even thinking, ‘if I were to call my future self right now, what would [he or she] think?’ might affect the decisions you make in the present,” he says.

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