Many people want to save for goals like buying a house, securing a child’s education or having an emergency fund. Yet, despite good intentions, they often struggle. The reason is not always a lack of money. Often, our own minds create obstacles.
Behavioural biases are mental shortcuts or habits that make us choose what feels easy now instead of what is wise for the future. In India, cultural expectations, social pressure and traditional thinking can make these biases even stronger. Learning to recognise these traps is the first step to building a reliable savings plan.
Here are common behavioural biases that can derail your saving schemes, with ways to avoid them.
Overconfidence Can Disrupt Careful Planning
Many people trust they know exactly how much they can save without testing that plan. Someone may say, “I will save Rs. 10,000 every month.” But life often surprises us with emergencies or rising expenses. This false confidence can also lead people to reject advice or avoid checking their plans.
How to avoid it:
- Write your plan. A written plan keeps you honest and accountable.
- Talk to a financial advisor or use an investment calculator to test your assumptions.
- Review your progress every quarter to see if you are on track.
Anchoring to Old Numbers or Habits
Anchoring happens when people fixate on an old number or habit. Someone might continue to save Rs. 2,000 per month for years, even though their income has doubled. Needs change over time, but this bias stops people from updating their plans.
How to avoid it:
- Review your savings target every year.
- Adjust amounts based on new goals and income.
- Use inflation calculators to see what your real need is.
Fear of Losing Money Can Lead to Avoidance
Some people avoid saving schemes that “lock in” their money because they want to stay flexible. Others fear market-based options like mutual fund SIPs, imagining worst-case losses. This fear keeps people from choosing plans that beat inflation.
How to avoid it:
- Learn the difference between risk and volatility. Not every short-term dip means a loss if you stay invested.
- Combine guaranteed options like PPF or RD with market-based ones for balance.
- Ask a trusted advisor to explain choices clearly.
Living Only for Today Can Hurt Future Goals
Spending on pleasures today can stop people from saving for tomorrow. Social expectations, weddings, travel and lifestyle upgrades all demand money. In India, it is common to say, “Let me enjoy now. The future will take care of itself.”
How to avoid it:
- Automate savings. Arrange to move part of your salary directly to a deposit or SIP.
- Set clear goals. For example, buying a home or securing education funds.
- Follow the 50-30-20 rule. Use 50% for needs, 30% for wants and 20% for savings.
Following Others Without Checking Your Needs
Many people copy what friends or relatives do without checking if it fits their goals. If everyone is buying gold or investing in the latest scheme, you might feel pressure to do the same.
How to avoid it:
- Ask, “Does this plan match my income, goals and risk tolerance?”
- Take time to study your options.
- Build a personal plan and stay focused on it.
Staying Too Loyal to Familiar Options
People often stick to the same savings account or deposit because it feels safe. But leaving all money in an account earning 3% interest while inflation is at 6% means losing value over time.
How to avoid it:
- Compare options once a year. Look at PPF, NSC, RD, mutual fund SIPs or pension plans.
- Diversify to spread risk.
- Learn about inflation’s impact on your goals.
Reacting Emotionally to Market Changes
Market dips or falling interest rates can trigger panic. Many stop contributions or withdraw early. This interrupts compounding and reduces long-term benefits.
How to avoid it:
- Check if your goals have really changed before adjusting your plan.
- Avoid daily monitoring. Review savings quarterly instead.
- Continue regular investing. Staying consistent helps you benefit from rupee-cost averaging.
Treating Money Differently Based on Source
People often see bonuses or gifts as “extra” and feel free to spend them quickly. This bias makes them ignore long-term goals.
How to avoid it:
- Treat all income equally.
- Set a rule to save half of any bonus or unexpected income.
- Direct windfalls to goals to strengthen your plan.
Build Better Saving Habits
Recognising these biases is not about perfection but awareness. Once you know these traps, you can build habits to avoid them. Make clear goals, use tools like automation and review your progress every year. The best saving scheme is the one you can maintain consistently over time, matching your needs and future plans. Small, steady steps today help secure your tomorrow.
