Financial psychology: When does a little money now beat more later?

September 08, 2015, 3:05 PM GMT+0

A large majority of Americans would wait a week to get $10 instead of $5, but just under half would take $5 million today over $10 million next year

The savings rate of Americans has slowly begun to creep up as the economy improves, but the current rate of 5.8% is still much lower than the average rate during the 20th century. Persuading people to save more money is not only difficult but much of America's economic growth depends on people spending money today and not deferring their consumption in order to build up their savings.

Despite the low actual savings rate the latest research from YouGov shows that most Americans are willing to trade instant gratification for a longer term payoff - if the deal is worth it. This is particularly true with shorter waiting periods. When Americans are asked whether they would take $5 today or $10 in a week, 74% of Americans say that they would wait a week for $10 instead of having $5 for free today. Americans are more impatient as the timeframe (and amounts at stake) increase. Offered the choice of $5 million today or $10 million in a year, 46% of the public say that they would take the $5 million today instead of waiting for $10 million.

There is little difference between most social groups when it comes to these findings. Men are not noticeably less likely to wait than women, nor are Democrats much more likely than Republicans to take the money immediately. Poorer Americans are more likely, however, to not wait. 30% of people with an annual household income of under $50,000 would take $5 today instead of $10 next week, compared to 19% of people with incomes over $100,000.

Younger people are also more likely than their elders to say that they would wait for the larger sum. While 63% of under-30s would wait a year for $10 million, Americans aged 30 or older are almost evenly split between those who would wait and those who would take the money and run.

Similar research conducted in Germany indicates that Germans, despite their frugal reputation, are not much more likely than Americans to wait for extra money. 85% would take 10 euros in a week rather than 5 euros today, but most Germans (54%) would take 5 million euros today over 10 million euros in a year.

Full poll results can be found here and topline results and margin of error here.