Meeting virtual older self helps people save for future

[From The Montreal Gazette]

Age now, save more for later


Shortly before the Great Bull Market of the 1990s topped out, advance warning came of a most unusual birthday gift. A television makeup artist with a deft hand for special effects agreed to sit me in her chair, dip into her pots of magic, and “age” me.

Turns out a sneak preview of version 70.0 is more prescient than anyone could have imagined.

New research suggests that showing someone how they’ll look when they’re old (through digital tinkering of the face) can add up to extra money in the bank for retirement.

Hal Ersner-Hershfield, 31, a post-doctoral fellow and visiting assistant professor at Northwestern University’s Kellogg School of Management, has found a behavioural link between facial time travel and saving.

Relying on digital technology to mimic aging, he and co-investigator Daniel Goldstein, assistant professor of marketing at London Business School, aimed to show young research participants an image of themselves 40 or so years down the road.

All the stops were pulled out: ears, noses and lips were enlarged using software designed to manipulate facial features; hair and eyebrows were Photoshopped grey.

Summing up the effect in a phone interview from Chicago, Ersner-Hershfield said: “Basically, we made everything sag a bit.”

Through programming that generated virtual reality, the young adults were able to interact with the senior version of themselves not just by sight but body language that matched their own.

So when a computer morphs a 22-year-old into a 70-year-old grandfather, especially one smiling at the prospect of greater financial security, how does he react?

“He ends up allocating more money to a hypothetical retirement account,” Ersner-Hershfield noted. And it was no small change: the extra savings tallied $112,000, spread out over a two-decade retirement.

Fright didn’t do the trick. The young adult inclined to save more had “bonded” with his older image, in turn cranking up the motivation to take care of the old man staring back at him.

“People feel their future self is very different from who they are now,” Ersner-Hershfield said, so the trade-off becomes spend now or sacrifice for later.

With that far-off destiny hard to imagine, many opt for the “instant gratification of smaller rewards” (dining out, shopping) than the larger, albeit delayed, rewards of saving.

But fast-forwarding to the 70-year-old you can be a real game-changer. The young woman who “feels an emotional connection” with her older face is willing to spend less on goodies now to invest for her future.

Changing habits to save more, and earlier, can’t come soon enough, the Chicago professor says, with the double-whammy of people living longer and underestimating the replacement income they’ll need in retirement.

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