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Trying to save more? Consolidate your bank accounts, researcher says

Wed, 04/17/2013

LAWRENCE — We all know we should save some money for a rainy day. Of course, that’s easier said than done when you really, really want that new iPhone. Or that new designer jacket. Or both.

But a University of Kansas researcher has a suggestion for people trying to spend less and save more: Consolidate your multiple bank accounts into one main account.

According to new research by KU School of Business assistant professor Promothesh Chatterjee, individuals will save more and spend less when they have a single account compared with multiple accounts. Chatterjee’s findings run counter to the conventional wisdom that people should spread their earnings across different accounts to increase their savings. Moreover, his findings have implications for policymakers trying to encourage saving among large populations of people.

“For years, the conventional wisdom has been that spreading your money across various accounts encourages you to save,” Chatterjee said. “Nowadays, the average American has multiple liquid accounts, typically a combination of checking and savings accounts. But our research finds this is the wrong strategy to encourage saving. We find that individuals are more likely to save if they have only one primary account, rather than many accounts.”

Chatterjee’s research utilized four separate studies totaling 566 participants. All four studies presented participants the opportunity to earn money across tasks and spend it on different products. The four studies collectively indicated a higher rate of saving among individuals who maintain one account versus those who have multiple accounts. The results will appear in the May 2013 edition of the journal Organizational Behavior and Human Decision Processes.

According to Chatterjee, his findings can be explained by two often-cited theories of behavior – “motivated reasoning” and “fuzzy-trace theory.” Motivated reasoning implies that individuals find spending more enjoyable than saving and are motivated to search for reasons to justify spending. In such situations, vagueness enables them to distort available information to follow desirable spending motives. And having multiple accounts provides that vagueness.

“Basically, people look for an excuse to spend, and vague information facilitates this,” Chatterjee said. “And having multiple accounts provides just enough vagueness to do the trick.”

In addition to the implications for individual savers, Chatterjee’s findings have notable implications for policymakers and organizations. For example, it is common practice in the banking industry to open multiple liquid accounts for new clients, again based on the conventional wisdom that having multiple accounts induces customers to save. Chatterjee’s findings would turn this common banking practice on its head.

There are national, macrolevel concerns here, too. The current national personal savings rate is estimated to be 5 percent, a paltry amount that many observers say threatens the long-term financial security of many people. Moreover, Americans’ inability to save appears to be independent of income and education level, in that high-income, college-educated U.S. households have just as much trouble saving money as low-income households with no college degree.

“Our inability to save is a national, near-universal issue,” Chatterjee said. “Given that context, this type of research is important to lots of people.”

Of course, there are some individuals who are quite comfortable with their multiple accounts and would find it difficult or inconvenient to consolidate money into a single account. But even those individuals could benefit from Chatterjee’s findings.

“If you’re really opposed to consolidating, you can at least try to reduce the vagueness of having money across multiple accounts by utilizing software and services that provide a consolidated view of all of your accounts in one place,” Chatterjee said. “This type of aggregate reporting could help reduce vagueness and enhance savings.

“But the take-home message remains: Consolidating multiple accounts into one account will help encourage you to save your hard-earned money.”



Wanna Skype? Chancellor gets creative to surprise Truman winner. See it here: http://bit.ly/1awodaa
Rock Chalk! Junior Ashlie Koehn named KU's 18th Truman Scholar
Ashlie Koehn, a University of Kansas junior from Burns studying in Kyrgyzstan, interrupted helping her host family prepare dinner to make a Skype call on Monday evening.

.@NYTimes columnist @WCRhoden will speak at a symposium about race and sports April 23. http://t.co/UiKA9MYNv0 http://t.co/PHwCOHqcfD
Wanna Skype? Chancellor gets creative to surprise Truman winner From KU News Service: http://bit.ly/1awodaa Ashlie Koehn, a University of Kansas junior from Burns studying in Kyrgyzstan, interrupted helping her host family prepare dinner to make a Skype call on Monday evening. To her surprise, Chancellor Bernadette Gray-Little was on the other end of the call letting Koehn know she had been named a 2015 Harry S. Truman Scholar. Koehn is the 18th KU student to be named a Truman Scholar and the only 2015 recipient from the state of Kansas. Earlier this month, she was also named a 2015 Udall Scholar. And in spite of a distance of more than 10,800 kilometers and 11 time zones, Koehn’s thrill from hearing the news from the chancellor came through loud and clear. “Ashlie’s experience at KU epitomizes a quality undergraduate experience. She challenged herself in her coursework, exposed herself to different research opportunities, studied abroad in Germany, Switzerland and Kyrgyzstan, and participated in both student government and community service projects,” Gray-Little said. “This is quite a year for Ashlie. Her hard work is a wonderful reflection on her and also a great reflection on the university, and we all congratulate her.” Each new Truman Scholar receives up to $30,000 for graduate study. Scholars also receive priority admission and supplemental financial aid at some premier graduate institutions, leadership training, career and graduate school counseling, and special internship opportunities within the federal government. Koehn, a member of KU’s nationally recognized University Honors Program, is majoring in environmental studies, economics and international studies. Her goal after earning her KU degree is to pursue a master’s degree in economics at either the London School of Economics or the University of Reading, with a focus on the economics of climate change. In 2014, she received KU’s Newman Civic Engagement Award for her work establishing the Coalition against Slavery and Trafficking. Her involvement with the issue was sparked by Hannah Britton, associate professor of political science and women, gender, and sexuality studies, who hosted national conference on contemporary slavery at KU three years ago. “Ashlie and I met several times to think about what KU students could contribute to the issue of slavery and human trafficking, and the result was her founding of KU CAST,” Britton said. “After a year as president, Ashlie successfully handed the organization over to the next student leader. She demonstrated her strong leadership qualities by setting a unique goal and then pursuing it with her sense of passion, engagement and dedication. No matter the country or context, her leadership strength is evident in her coursework, her public service and her work experiences.” The University Honors Program works with a campus committee to select KU’s nominees for the Truman Scholarship and supports them during the application process. Anne Wallen, assistant director of national fellowships and scholarships, noted it was an amazing ruse to pull off the surprise. Originally, the call was set up to be between Wallen and Koehn. “I was totally not prepared to be greeted by Chancellor Gray-Little, but it was an amazing surprise for sure,” Koehn said. “As a first-generation student, it took time to learn the collegiate system, but my parents taught me to be resourceful and independent from a young age and KU and the Kansas Air National Guard have provided me with the opportunities to drive me into the future, both at graduate school and in my career. I plan to use the Truman Scholarship to pursue a career as an environmental economist helping to shape future trade agreements and leverage action on important international environmental issues, particularly concerning climate change.” Koehn also had a surprise of her own for the chancellor — the meal she was helping to prepare was not exactly typical Kansas dinner fare. On the menu with her host family in Kyrgyzstan on Monday was a traditional Kyrgyz meal called Beshbarmak, or “five fingers,” because you eat it with your hands. The dish is made of horse and sheep and was being prepared as a birthday celebration for Koehn’s host mom. Chancellor Gray-Little, as she signed off from Skype, made sure to encourage Koehn to enjoy her Beshbarmak. Koehn is the daughter of Rodney and Carolyn Koehn of Burns. She graduated from Fredric Remington High School in Moundridge. She is an active member of the Kansas Air National Guard and currently on leave while studying abroad in Bishkek, Kyrgyzstan. She is a member of the KU Global Scholars Program and a past member of the Student Senate. In addition to being named a 2015 Truman and Udall scholar, she was named a 2014 Boren Scholar and Gilman Scholar and in 2013 was named the Kansas Air National Guard Airman of the Year.


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