Why is it So Difficult to Convince People to Save and Invest?

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Ugh, frustration (Flickr CC by Zach Klein)

Instead of the regular post where I drop knowledge on you, I thought I would flip this around a bit and pose this question to the group…

Why is it so difficult to convince someone that it’s in their best interests to save money, build an emergency fund, and make a few sound investments?

I ask because earlier today, I had a discussion with a friend I’ve known for nearly a decade who came up with excuse after excuse why she had more important things to do than setup a Roth IRA.

Here’s the distilled version of her excuses not to save and invest:

But I’m young (28), I need to live life and have fun. She used the catchy phrase: places to go, beaches to see!
There are so many other things I can buy with $5,000 per year.
I don’t trust the stock market anymore since my 401k balance is no different today than it was in 2005.
It all seems so pointless since “they” get my money in the end anyway.

I’ll fully admit that I’m one of the worst salesmen in the world. However, I can put together a fairly persuasive argument if I have the right collection of charts and graphs to help me convince someone saving is a good thing.

But something tells me that I can talk until I’m blue in the face and nothing I say will convince her otherwise.

So I ask you fellow readers…

How do you convince someone that has their mind made up? How do you persuade those that don’t want to be persuaded?

How do you make a reasonable argument that a little self sacrifice today can lead to a better tomorrow?

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Posted by Matt SF @ 10 December 2009 12 comments

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Dec 11, 2009
8:18 am

#1 Kyle :

It is kind of linke the government I think. You talk about improvements but all it amounts to is a bunch of feather ruffling. Then when TSHTF you try to figure out what went wrong and realize you need to plan better for the future. Some people require that rude awakening to get started. Unfortunately it is usually too late by that time.
.-= Kyle´s last blog ..Friday Finance Followers – Site Updates Edition =-.

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Dec 11, 2009
11:14 am

#2 Matt SF :

Yeah that rude awakening thing is a real problem. There is “living” but there is definitely a thing known as “too much living” and she just doesn’t get it — yet — that she’s overextending herself.

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Dec 11, 2009
11:49 am

#3 Craig :

For similar reasons you mention. Also the lack of funds coming in at a younger age mixed with the wanting to have a social life makes it difficult.
.-= Craig´s last blog ..Weekly Personal Finance Roundup =-.

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Dec 11, 2009
12:27 pm

#4 kenyantykoon :

if a person does not want to be persuaded by another persons advice, then i would rather let the consequence of the misdeed persuade him/her. that lesson will leave an indelible mark that no amount of words ever will

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Dec 11, 2009
12:55 pm

#5 Matt SF :

@ Craig,

Good point, and I’m sure that’s probably the case with most young adults since money is tight. But she’s making some major bank for a 28 year old.

I’m thinking if she setup an automatic savings plan, it might do her some good. If she doesn’t see it in her account, she won’t try to spend it.

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Dec 11, 2009
12:58 pm

#6 Matt SF :

@ kenyan

Yeah, I mostly agree with that. It’s not like I didn’t try to convince them otherwise, but since she’s a friend, I’ll probably continue to drop some subtle hints until she complies.

Maybe I’ll just appeal to her sense of responsibility or dangle future returns of a tax free investment vehicle in front of her. Temptation and guilt are powerful motivators.

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Dec 11, 2009
9:15 pm

#7 Tracy :

Her attitude is par for the age and our society. I should know…I was the poster child for this behavior. And I didn’t overcome it until about a year and a half ago. Feel free to borrow from my experience. I will be spending the next few years paying off debt instead of retiring. It is what inspired me to begin blogging in the first place and what has finally convinced me that sustainable means more than recycling and actually applies to economies, both personal and global.

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Matt SF Reply:
December 14th, 2009 at 12:00 am

She really isn’t in debt to the best of my knowledge. I believe she uses her credit cards, but pays them down every month. So that’s a positive, and perhaps I should have given her more credit for that than imply she was in debt. My apologies if I did.

I think my problem is that I tend to look 5 years and beyond whereas most people (according to psychiatrists) prefer to think more short term. So I’m looking for behavioral adjustments and more work devoted to saving and investing now, so she can sit back and chill when she’s 50.

Perhaps that’s also not her way of thinking. I like early retirement and she likes to live it up while she’s young. Maybe I just solved the riddle!?!

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Tracy Reply:
December 14th, 2009 at 11:54 pm

If you can just convince her that saving an extra hundred a month will not keep her from enjoying life now, but will net her a pile of money to play with later. She just needs to understand that it’s not an either or equation. She can live now and save now. It can be a small amount that she doesn’t even notice.

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Matt SF Reply:
December 15th, 2009 at 11:36 am

I think I’ll try to suggest an automatic savings and investing program through Vanguard. If she never sees that extra $100 in her account, she’ll never miss it.

Out of sight, out of mind!

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Dec 11, 2009
10:56 pm

#8 Financial Samurai :

Matt – It’s probably even harder to convince people to save and invest after the past 18 months.

Why invest and lost 30-50% of your money when you can spend it on something and enjoy now?!

All about instant gratification!

Your friend may be doing it right actually. She’s living it up, having a good time. Maybe she’s loaded elsewhere? At least she’ll look back and no she had a great time, even though she might not have as much money saved.

Best,

Sam
.-= Financial Samurai´s last blog ..Someone Has To Give Birth! Why Women Shouldn’t Be Penalized For Being A Mom. =-.

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Matt SF Reply:
December 14th, 2009 at 12:02 am

Instant gratification is probably more her speed. She’s a very “live for today” person, so may as well do it while you’re young and hangovers don’t hurt nearly as much.

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