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Helping students to balance their budget

By Malgorzata Pawlak & Adam Szyska
Posted on February 13, 2019

Techniques such as visualisation may aid students significantly, Polish research shows.

A penny for your thoughts… and even more pennies for young people’s thoughts! Just think of the results both banks and financial educators could achieve if they realized what young people (such as students) truly think about, say, non-cash payments. Perhaps we could actually get them to keep track of the money they’re spending. And wouldn’t it be interesting to know which emotions students experience when dealing with money? Małgorzata Pawlak, PhD candidate from Warsaw School of Economics (SGH), decided to find out, supervised by professor Adam Szyszka (SGH).

At the heart of Pawlak’s qualitative research question lies the so-called “emotional landscape”: what customers feel when dealing with money. From November 2018 till January 2019, Pawlak conducted several individual interviews with Polish students, diving deep into their financial world. What do they think about money and money-related emotions?

In the second part of the research, Pawlak worked with three focus groups of young people. They discussed various case studies based on real issues related to over-spending, saving and investing – issues that had emerged during interviews. The respondents actively contributed to generating solutions to these problems, taking the perspective of a friend or a bank. Some solutions were brand-new, other tools are already implemented by banks.


Knowing your younger customer

The discussions certainly led to a better understanding of young customers. Students proved an interesting target group: they are trying to reach financial independency, climbing their way up from full parental dependency. Discussing over-spending, saving and investing led to various insights:

  • Parental attitude matters. There are clear links between what parents think about money and their children’s opinions – some copy their parents, others do just the opposite or mix the attitudes.
  • The sense of financial security during childhood may be decisive.
  • Respondents studying economics are significantly more motivated to focus on their budgets and be financially successful. Those coming from humanistic faculties report less knowledge, both subjective and objective (e.g. inability to differentiate consumption from investments). They are less interested in financial issues in general.
  • The distribution of payments is mostly non-cash. Not only because paying by card or smartphone is quick, comfortable and trendy, but also because it helps to track finances easily using a banking app. Cash is merely practical in places without card option. The ability to control budgets more efficiently when paying with cash, is applicable only to small sums of money.

“Emotions determined students' financial decisions. Guilt provides a good hook to help limit overspending, but it also relates to addictive shopping sprees.”

Financial EQ: guilt and anxiety

Mapping the students’ emotional landscape turned out to be most intriguing. The main emotion present in each emotional landscape determined their financial decisions. Some students expressed a sense of guilt related to spending (which, surprisingly, did not always correspond to their willingness to save or invest). This guilt could provide a good hook to help limit over-spending, but it could also be related to a vicious circle of shopping sprees, similar to addictive behaviours. Other respondents were motivated by seeking pleasure and entertainment, or by anxiety about potential financial problems.

As mentioned earlier, the relationship with the family also plays an important role both in shaping financial behaviours and motivating certain actions. Students setting reasonable spending limits for themselves are motivated either by loyalty to their parents (who claimed to work hard to support them), or by anxiety (for example because of the catastrophic scenarios outlined by their parents).


Lessons learned and solutions offered

The students who were part of the focus groups enjoyed an extra benefit: they mentioned they learned a lot during the workshops. Although the investment topic was a bit of a blur to most students, having had no personal experience with investing, they certainly came up with many ideas to avoid over-spending, and were indeed encouraged to save more.

So how to encourage students to limit over-spending and stick to saving? Firstly: analyse your budget, make smart changes in the financial products used (from credit card to debit card, limits and automatic transfers to savings account, barriers and additional access codes). Secondly: get smarter about money. Banks could play a part in this, including offering psychological consultancy to tackle addictive behaviour.

The respondents have high hopes for reminders about previously set goals. They also consider visualisation a crucial part of a wider strategy, including measuring financial progress, SMS reminders and encouraging updates about customer goods already within financial reach. Those saving for a flat would, for instance, be presented with pictures of the kitchen they can already afford thanks to their excellent saving skills.

Innovative ideas included financial incentives like discounts, and non-financial awards such as fancy dinners. And how about a gamification-like platform with avatars, actions and upgrades possible when reaching a certain goal? “2k will get you to Mars, but if you reach 3k, you can upgrade your e-banking interface and fly to Saturn!” Finance shouldn’t be scary or dull - let’s turn it into something positive and innovative instead.