A New Reason to Check Your Bank Balance

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If you thought you could save money simply by checking an app on your phone regularly, would you do it? Heck ya, right? Ok, but what if the app showed your bank balance? Would your answer change?

If you’d feel more hesitant, it could be because of the so-called “ostrich effect.” According to behavioral economists, some of us purposely avoid knowing where we stand with our money — just like an ostrich who buries their head in the sand — because of fear we’ll be disappointed by what we see.

But let’s go back to this saving money incentive. According to a group of business school professors, checking your bank account regularly can accomplish more than you might think.

The professors’ study of what’s known as the “payday effect” — the tendency to overspend right after getting your paycheck — shows that people who don’t check their accounts regularly spend significantly more after they get paid, including on impulsive shopping or eating out.

“Regular account monitoring appears to be a powerful tool for avoiding the common trap of overspending after payday,” Ray Charles Howard, one of the professors, wrote last November in a newsletter published by the University of Virginia’s Darden School of Business.

Compared to infrequent checkers, regular account checkers show 60% to 70% less variation in their discretionary spending, the research shows. (They are also more apt to notice things like fraud attempts.)

So what? Avoidance is a common psychological response to many things that make us anxious, including our finances. But using some of today’s most ubiquitous digital tools can push us to be more disciplined. If you just can’t look at a balance you’re worried is low, Howard suggests taking these steps to overcome your fears:

•   Set regular dates and times to check your banking apps.

•   Don’t overdo the checking – constant text notifications can make you anxious.

•   Look for spending patterns and trends rather than focusing on absolute numbers.

•   Use a budgeting app (such as SoFi’s Relay) that brings all your accounts together for a big-picture view.

Related Reading

•   Do You Ignore Your Bank Balance? You May Be ‘Money Avoidant’ (SoFi)

•   Anatomy of the Average American Paycheck (Talker Research)

•   Risks of Buy Now, Pay Later: ‘Ticket to Overspending,’ Expert Says (Fox Business)

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