The (behavioural) science of budgeting

A staggering 73 per cent of millennials struggle to prioritise their financial wellbeing because thinking about money makes them ‘anxious’, new research commissioned by Commonwealth Bank has found.

Despite this, 70 per cent say being in control of finances makes them feel most accomplished. “The thing with habits is when we say, ‘tomorrow I'm going to start this new thing and I'm going to keep doing it’, the unfortunate news is that if we're just relying on that momentary motivation and intention, it's very unlikely to stick,” says CBA’s Head of Behavioural Economics, Will Mailer.

In a new podcast interview, Mr Mailer explains how and why human behaviour bucks economic logic, particularly in the current pandemic — and gives useful strategies to smarter money management.

Mr Mailer said if we want to better manage their finances, we can’t just say they are going to do it, we have to ensure we have the right environment and systems in place to do so.

“Creating systems and environments that can help us not have to think through every step, every time. Start to set up systems that endure beyond the crisis period so that when we go back to the office, when we're back on transport, all of our good new habits and settings don’t unwind,” he said.

“Features like [CBA’s] Bill Sense, transaction notifications, and category payments, are really good examples where we can take the load off the human, capture that good intention, and automate it into the future.

Mailer suggests that a new wave of digital financial experiences can help us to regain control at a time when it is getting harder to carefully balance our spending, saving, and future planning behaviours.

“So whether we name our accounts in different ways, we set up partitions, we use good feedback tools like transaction notifications… don't just rely on good habits, raw motivation and intent. We actually have a system that will support our behaviour and help us achieve our financial goals,” Mailer said.

Mr Mailer’s comments follow the launch of Commonwealth Bank’s latest digital feature, Bill Sense, which predicts future bills to help with budgeting, and is now available in the CommBank app.

To hear more from Mr Mailer, listen to his full interview with Commonwealth Bank’s Editor-in-Chief, Danny John.