Does your mother tongue influence your attitude to saving?

Could the fact you speak a language such as English rather than, say, German or Mandarin affect your financial decision-making? On the aye side of this debate is UCLA behavioural economist Professor Keith Chen. Those disputing his controversial theory include leading linguists and behavioural economists. By Richard Rawlinson

Chen claims his research reveals that the grammar we use affects both our finances and our health: how we save for our retirement, and how we take care of ourselves through exercise and diet. He divides the world’s languages into two groups, depending on how they use the present and future tense and, therefore, treat the concept of time. For example, strong future-time languages, ranging from English and French to Tamil, say, ‘it will rain tomorrow’. Weak future-time languages, ranging from German and Estonian to Mandarin, say, “it rains tomorrow”.

Chen argues that the speakers of languages which use the present tense when dealing with the future are likely to save more money than those who speak languages which require the use of a future tense.

“The act of saving is about understanding that your future self is in some sense equivalent to your present self,” says Chen. “If your language separates the future and present in its grammar, that seems to lead you to slightly disassociate the future from the present every time you speak.”

He asserts that the findings of his research extend to different approaches to health. Just as those speakers of languages with no real future tense are likely to have saved 39% more by the time they retire, he says, they are also 24% less likely to smoke, and 29% more likely to be physically active.

But surely there are lots of factors other than language that contribute to how we invest in our futures? There’s the strength of a nation’s welfare state, and the position of an economy’s interest rates. Chen’s theory is not without its detractors.

Linguist John McWhorter of Columbia University says his own studies show the extent to which language shapes thought is minuscule, and Morten Lau, Professor of Behavioural Finance at Durham University, says: “In my work with savings, it’s interest rates that determine savings behaviour.” Of Chen’s health claims, Lau adds, “In our research in Denmark, we found that male smokers wanted a higher interest rate on their savings than did non-smokers. But that this did not apply to women smokers.”

Chen replies that his research has factored in cultural, social and economic differences by concentrating on multi-lingual countries ranging from Belgium, Estonia and Switzerland to Nigeria, Malaysia and Singapore.

“You can find Nigerians who speak Hausa and Yoruba who live right next door to each other, yet have radically different saving behaviour,” he says. “What’s remarkable is that, when you find correlations this strong, that survive so many aggressive sets of controls, it’s actually hard to come up with a story of what else might be causing the phenomenon.”

So we’re left with a stalemate. Perhaps language and culture are too intricately intertwined to ask what was first, language being what it is because of culture, and vice versa.

Chen’s studies are in the tradition of early 20th century American linguist Benjamin Whorf, who advocated the idea that differences between the structure of languages shape how their speakers perceive the world. He called it the principle of linguistic relativity, because he saw the idea as having implications similar to Albert Einstein’s principle of physical relativity. It was Whorf’s work that sparked urban legends like the 50 different words for snow in Eskimo languages.

Saving is about understanding that your future self is in some sense equivalent to your present self

However, it seems that certain categories such as colours, space, time and emotions point towards linguistic relativism rather than to universal rules in all language communities. Great thinkers from Adam Smith to John Maynard Keynes have argued that humans are plagued by a tension between passion and reason, emotion and logic. Such emotionality manifests itself in investment decision-making, with studies and experiments showing there’s often little rhyme or reason to how people respond to information.

In his book Misbehaving, Richard Thaler says that “to understand the consumption behaviour of households, we clearly need to get back to studying Humans rather than Econs. Humans do not have the brains of Einstein, nor do they have the self-control of an ascetic Buddhist monk”.

One thing to agree on, then: an individual consists of two ‘selves’: the ‘planner’ for the future, and the ‘doer’ who lives for and in the present.

3 Brilliant Behavioural Finance Books


by Richard Thaler

Utilising anecdotes as well as empirical studies, this seminal work explores crossovers between economics and psychology to warn financial analysts against neglecting the study of human behaviour: people misbehave, and that means economic models can make some bad predictions.

Thinking, Fast and Slow

by Daniel Kahneman

This excellent book focuses on dual process theory, which explores two kinds of thinking: the fast and intuitive, and the slow and deliberative. Kahneman’s experiments show how making assumptions based on perceptions lead us to fail to calculate probabilities.

Predictably Irrational

by Dan Ariely

This exciting read investigates human decision-making, whether in market dynamics, relationships or government policy. Takeaways include: we have no idea of the real value of things; and the old supply and demand theory explains only a fraction of what happens in the marketplace.

How does your love of money affect your ability to make it?

Fiscal lesson #1

In the first in a series lifting the lid on a famous behavioural science experiment, we highlight the counter-intuitive findings of a survey revealing that the more you love money, the less it appears to love you back.

Nearly 60% of investors who score highly on a ‘love of money’ scale actually have bad financial outcomes, according to research by global financial services company State Street. Its survey, questioning 3,600 consumers across 20 countries, shows that so-called money lovers are less likely to contribute 6% or more to a retirement plan, and are more likely to agree that saving is “something they can do in later life”.

“Money lovers are very much susceptible to instant gratification effects and short termism,” says Suzanne Duncan, global head of research at State Street. “They are also more prone to fear-based motives and greed-based motives for buying and selling. As a result of this, they tend to buy high and sell low, and would rather have $1,000 now than wait five years and earn $1,900.”

China has the world’s second highest love of money score; India tops the list

China has the world’s second
highest love of money score;
India tops the list

These same consumers are prone to hyperactive behaviour, according to the survey: for example, they check their mobile phones approximately twice as many times as those further down the money-loving scale.

The highest ‘love of money’ score was found in developing countries such as Brazil, China and India, which Duncan attributes to a lack of government safety nets like social security. Rather than encouraging people to save for old age, the lack of financial assistance in fact drives them to crave money more in the here and now.

Loving money also varies with age, with young people (Millennials) tending to love it more than their parents (Baby Boomers) or grandparents (Traditionalists, or the World War II generation). State Street found no correlation between love of money and wealth level. Duncan says it’s not about how much you have – but rather your emotional connection to it.

Photography: Stocksy/Getty Images

Contacting us is easy

Call us on 0345 279 8880

  • Monday to Friday08:30 - 17:30

You will be connected to a member of our team. They will be happy to help answer any questions you may have.

Let us call you back

Please complete as many fields as possible, the fields marked with * are required.