Saving is genetic?

One of our advisers recently sent me a study that examined the influence of genetics on savings behavior. Here is a short abstract from the study:

Analyzing identical and fraternal twins matched with data on their savings propensities, we find that genetic variation explains about 33 percent of the variation in savings behavior across individuals. Parenting effects on savings behavior are strong for those in their twenties but decay to zero by middle age, i.e., parents do not have a lifelong non-genetic impact on their children's savings. The family environment when growing up and an individual's socioeconomic status later in life moderate genetic effects, so that more supportive environments result in a stronger genetic expression of savings behavior. We also find that savings behavior is genetically correlated with income growth, smoking, and body mass index, suggesting that the genetic component of savings behavior reflect innate time preferences and lack of self-control.

So, apparently, 33% of our savings behavior is genetic. The rest is driven by parenting, environment, and personal preferences. Wow, that was profound [insert sarcasm here]! Our behavior (aka decisions) has always been driven by multiple factors including genetics, environment, independent situations, personal preferences, and the list goes on. Often, we know why we make bad choices; we just don’t know how to stop.

Fortunately, research and experience has shown us how to change behavior. A few tips that I’ve found helpful include:

  • Make a good decision today – focus on making the right financial decision once. Then try to do it again. Goals are great but can be overwhelming. Focus on making your next choice a good one and you will quickly see progress.
  • Automate – Direct deposit is a good thing. Use it early and often to protect yourself from yourself.
  • Use a System – Find a system that you like and execute. People spend too much time creating their plan and not enough time executing. Find an ‘off the shelf’ plan and get started.
  • Reward Yourself – Maybe it’s a trip to Tahiti…or maybe not. Find non-monetary rewards to keep you on track. Give someone else the ability to grant the reward (so you don’t cheat).

I appreciate reading these academic studies on financial behavior. Still, I take them with a grain of salt when it comes to changing behavior. We each have significant control over our actions. We know that we can make mistakes and still recover. We know will power and commitment beat environment and genetics all the time.  We’ve all seen the remarkable stories of tragedy and triumph and said, “It’s possible.” Simply put, while the study provides interesting answers to the drivers of savings behavior, I think it asked the wrong question.

What do you think about the study? Do you think savings is genetic? What are the other factors that drive how we behave with money?