The costs of experiences: better save than sorry

by: Laura Straeter
Posted on February 21, 2018

An exotic vacation, a beautiful wedding, a new environmentally friendly car - these are all big-ticket items. And though they're not everyday expenses, they can still have an enormous impact on your budget. When there's not enough money on your account to pay for these things, you might consider borrowing the money instead. But whereas a personal loan may satisfy your current wishes, you'll need to pay off the debt later. Furthermore, if you're not careful, debts from various loans can quickly add up and create a heavy financial burden over time. Limiting the number of purchases that are paid with a loan would prevent a lot of people from getting into financial problems in the first place.

The experience matters  

As said, personal loans  may satisfy many different needs and desires. So an interesting question is: Do people take out a loan for any kind of large purchase? Researchers from University of Southern California and Dartmouth College1 say no. Although it is commonly believed that people are most likely to take out a loan for durable material purchases (e.g. a new kitchen or car) because they consider them worth the interest payments over many years, the researchers refute this assumption. Instead, they learned that people are rather more likely to borrow money to pay for short-lived planned experiences.

“"The fear of missing out on experiences is a growing issue in our society"”

Planned experiences, such as a holiday or wedding, are subject to a certain time pressure. These experiences are often scheduled to take place on a specific date or in a window of time; as a consequence, they can’t be easily rescheduled or postponed. If people don’t purchase the experience now, they might forgo the opportunity to experience it at all. For example, you can’t postpone a planned ski trip with a group of friends: if you can’t join, your friends will go skiing without you.

The fear of missing out on experiences is a growing issue in our society. These stressful reactions are largely triggered by social media2. Users of social media platforms, such as Facebook and Instagram, are continuously aware of all the events they missed out on. This fear to miss out on events could intensify the need to request a personal loan in order to pay for, and be part of, a planned experience, possibly increasing one’s debts as a result 

This raises the question of how to positively change and reduce people’s lending behaviour in order to pay for experiences such as the ski trip. The researchers from University of Southern California and Dartmouth College suggest that people are less likely to borrow for experiences that aren’t yet scheduled, or aren’t subject to time constraints. So if the exact date for that ski trip with your friends has not been decided yet, or the trip takes place each year, you will be less likely to borrow to pay for that experience.

Stay focused and set reminders

Does this mean you should deny yourself certain experiences or not spend money on them? Not at all! After all, experiences increase our happiness even more than material purchases do3. However, to be able to pay for all experiences it would be best to adapt your savings and take into account the planned activities. Research suggests that when you have a clear goal in mind, you will save more provided you also focus on your personal reasons for having that experience4. In addition, reminders seem to be of great help too. Especially when the reminder is linked to a specific purchase, people save more5. So if you want to save for that next ski trip or any other planned activity, keep thinking about the reasons why you don’t want to miss out on that activity and create reminders to save, whether that’s a repeated message on your phone or a note taped to your kitchen cupboard.

These suggestions could be very insightful for the development of technological applications to help people save more and borrow less. Within TFI’s scope these kind of innovations are stimulated in different accelerator programs, learn more about them here.


  • 1 Tully, S. M., & Sharma, E. (2018). Context-dependent drivers of discretionary debt decisions: Explaining willingness to borrow for experiential purchases. Journal of Consumer Research, 44, 960-973.
  • 2 Abel, J. P., Buff, C. L., & Burr, S. A. (2016). Social media and the fear of missing out: Scale development and assessment. Journal of Business & Economics Research, 14, 33-44.
  • 3 Van Boven, L., & Gilovich, T. (2003). To do or to have? That is the question. Journal of Personality and Social Psychology, 85, 1193-1202.
  • 4 Ülkümen, G., & Cheema, A. (2011). Framing goals to influence personal savings: The role of specificity and construal level. Journal of Marketing Research, 48, 958-969.
  • 5 Karlan, D., McConnell, M., Mullainathan, S., & Zinman, J. (2016). Getting to the top of mind: How reminders increase saving. Management Science, 62, 3393-3411.