Language and Savings

Behavioral Finance
Sarah F. Roach

There has been considerable research into why some people save more money than others. In that vein, I want to discuss a fascinating talk given by UCLA economics professor Keith Chen entitled, “Could your language affect your ability to save money?”

First some background: Among the world’s wealthiest industri­alized countries (all members of the Organization of Economic Cooperation and Development—OECD), there are enormous differences in savings rates: As of 2015, China saved an amazing 47% of its GDP, while the U.S. saved a paltry 3.7% and Greece and Portugal actually experienced depleting savings. While a lot of theories attempt to explain these differences, Dr. Chen offers a unique one involving language.

As a bilingual Chinese American, Chen realized early on that the Chinese language does not require tense—a time marker—the way English does. For example, while it’s incorrect to say “it rain tomorrow” in English, that grammar is correct in Chinese. Put differently, Chinese could be called a “futureless” language, whereas English is “futured.” This led to his hypothesis: If your language causes you to speak about the future as fundamentally separate from the present, could it also cause you to subconsciously think about the future as more discon­nected from the present than languages that minimize or ignore time?

There are a number of futureless languages spoken throughout OECD countries, and, on average, such countries experience savings rates five percentage points higher per year than countries with futured languages. Over time, that difference becomes quite significant.

Given that countries—and families—vary by many factors, Dr. Chen joined with colleagues in linguistics and psychology to see if they could eliminate many of the variables unrelated to language. To that end, they analyzed data available in enormous data sets including the Survey of Health, Aging and Retirement in Europe, a demographic and health survey in Africa from USAID, and a values survey measuring worldwide political opinions and savings behavior. The researchers uncovered nine countries with significant populations speaking both futureless and futured languages. From these countries’ data they gleaned “matched pairs” of families that were nearly identical across a large number of characteristics— with the exception of language. For example, they might compare two families in Brussels that differed primarily in that one spoke Flemish and the other French.

After controlling for unrelated variables, the savings effect of language persisted: Futureless language speakers were 30% more likely to report having saved in a given year than their “futured” counterparts. What’s more, since savings might be considered current “pain” for future pleasure, the researchers analyzed behaviors like smoking and a sedentary lifestyle—current pleasure at the expense of possible future pain. Futureless language speakers were 20-24% less likely to smoke and 13-17% less likely to be obese at retirement than futured language speakers.

This research is new and may generate more questions than answers. Since it’s unrealistic to increase savings by teaching everyone Chinese, Chen suggests that one reasonable goal is to develop tools aimed at making people more conscious of the subtle factors that inhibit savings.