If someone were to tell you that the English are worse at saving money than the Finnish, would you believe them? Probably not – even though it’s true.

The global economic financial crisis has reignited public interest in one of the oldest questions in economics: why is it that countries with seemingly similar economies and institutions can display radically different savings behaviour?

How language affects savings

Many economists have spent their entire lives trying to answer this question, and Keith Chen, an Associate Professor of Economics with tenure at the UCLA Anderson School of Management, has come up with an intriguing, yet a very pertinent answer: the spoken language has a significant influence over people’s ways of saving.

In his paper, he categorises languages into two groups: languages with a strong future-time reference (FTR) and languages with a weak future-time reference. For example, English has a strong FTR, as the English grammar requires speakers to mark future events: ‘It rained yesterday’, ‘It rains today’, ‘It will rain tomorrow’. On the other hand, German and other Germanic languages have weak future-time references. Most speakers feel completely comfortable talking about rain tomorrow by saying, ‘Morgen regnet es’, quite literally to an English ear, ‘It rain tomorrow’. This fact alone makes people act differently.

He observed that people speaking languages with strong future-time reference are not too keen on saving early to benefit in the future, as these languages make the future seem so distant. However, for people speaking languages with a weak future-time reference, the future seems a lot closer due to how the language is spoken and written. Therefore, they think more about the future and save up for it as early as possible.

Futureless language speakers are 30% more likely to report having saved in any given year. This fact has cumulative effects: by the time they retire, futureless language speakers holding constant income are going to retire with 25% more in savings.

Check out the original TED talk from Keith Chen:

Keith and his colleagues are getting to grips with understanding the ways that these nuances cause us to think more or less about the future every single time we speak. Their ultimate goal, once they understand how these subtle effects can change our decision making, is to be able to provide people with tools so that they can consciously make themselves better savers and more conscious investors in their own future.