Catherine Byerly, Writer
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APA Byerly, C. J. (2020, September 16). Inside the Brains of a Saver and a Spender. Retrieved June 26, 2022, from

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I am not an accomplished hair stylist. But there I was on a dorm room floor cutting my best friend’s hair in order to save her the 15 bucks at a walk-in salon.

Since we were in college, I’ve always admired my friend Julia’s ability to save money. Other people were out buying the latest SUV, while Julia was taking the shuttle. When everyone else was out buying a new dress for a mixer, Julia was rocking the same classic all-black number.

If one of us, even way back then, were to consider saving for an annuity or converting a gift annuity into cash – it would be Julia.

I mean, she was even brave enough to let me cut her hair sitting on her dorm room floor rather than pay the salon.

I always wondered what made her so much different than me in that regard. Was there a gene, like the one that made her hair a different color than mine that made her so much more pragmatic with money than I was?

Turns out, there is a difference in brain chemistry in what makes someone a saver and makes someone else a spender.

This Is Your Brain on Money

It’s just like knowing the difference between what’s edible and what’s dangerous: on a physical level, both Julia’s brain and mine know what money is but interpret it slightly differently.

Brian Knutson, a neuroscientist, conducted an experiment studying MRI images of people’s brains as they handled money-related tasks.

When people were actively deciding to purchase something they wanted, parts of the brain responsible for happy emotions were activated. One of his observations was the release of dopamine – a neurotransmitter responsible for feelings of pleasure – in the nucleus accumbens, a portion of the brain involved in reward and addiction. Knutson detected release of dopamine when people were anticipating purchasing something they wanted.

Conversely, when faced with excessive prices the brain visibly reacted as well. Knutson saw reactions in the insula region of the brain, the area that is also activated when someone feels or anticipated the feeling of pain.

Dr. Maha Alattar, a neurologist at Mary Washington Hospital, says that Knutson’s research shows that people who are spenders are wired differently than savers, and suggests that each type may be more tuned into the one of the two sensations. So Julia is probably more attuned to the negative response in the insula, while I’m more attuned to the happy dopamine sensation. It may be as simple as spenders not feeling as much “pain” when they spend money as the savers do.

Learning Financial Literacy

So is there hope for those of us who aren’t a Julia? Maybe a little.

Research conducted by Santa Clara University’s Leavey School of Business sought to determine if spending and borrowing habits were more a function of nature or just plain desire. The research suggested some of it was inborn. About 25 percent of people are born with a particular gene that causes their brain to have a better grasp on using self-control during decision making. It’s likely that my friend Julia has that gene.

Here’s an excerpt from the study, explaining how the brain makes decisions:

“The way our brains make decisions can be equated to a human rider atop an elephant. The elephant represents our habitual, fast thinking processes – things like walking, breathing, brushing our teeth, taking care of simple chores. The elephant is strong yet difficult to control. The rider on the other hand represents our “strategic” processes – activities like planning, list making, and other deliberate efforts to overcome our instincts… The question we all wish to answer is: How do we overcome natural instincts and our habits to successfully equip our riders with skills to point their elephants in the right direction?”

But while some people are born with a smarter elephant and thus better equipped on a brain level to make solid financial decision, there are still ways to train the rider to be a stronger force for making good money choices.

Part of it is self-awareness. For those who know they’re prone to spending, like me, it’s important to ask myself why you feel the need to shop. Are you just looking for that dopamine rush? Or do you need the guilty pleasure of just stopping by the mall after a bad day at work? In moments like these, maybe it’s better to go on a run or phone a friend rather than spend money.

By being aware of how your brain reacts, you can set yourself up to make more strategic choices rather than letting bad habits reign, possibly ones that have grown numb over time to the bad effects and end up landing you in debt. It’s a cycle that’s very easy for structured settlement owners to fall into, when they spend and spend in anticipation of receiving a monthly check, often resulting in a cycle of getting in significant debt for the spender.

And for savers like Julia, spending money on a credit card rather than cash anesthetizes the pain of spending money for both spenders and savers a like – so encouraging people who are more likely to be spenders to use cash could train them to make better decisions.

The Best of Both Worlds

Brain chemistry might set Julia and my brains’ apart from one another, but that doesn’t mean we can’t plan for our financial future in the same way.

As young professionals any money we invest now is critically important. Most financial professionals agree that your financial habits in your 20s determine a good chunk of your financial future at large. It’s also a time where many of us inherit money. In that situation, purchasing an annuity through an insurance company with those funds can be a great way to bulk up your nest egg early.

If you know if you’re a spender or a saver, you can use that money to hack how you view investing in your future. For a spender, that might mean thinking about all the exotic vacations you can take once you retire.

If you’re a spender receiving structured settlement payments, a good balance could be working with a financial advisor to use your monthly payments to invest in stocks. That way you get the sensation of spending while also investing in your future. And it also couldn’t hurt to find a saver as a best friend to help balance you out.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: September 16, 2020