Rachel Choi is a Behavioural Analyst at Canvas8. With a degree in Archaeology and Anthropology from Oxford University, she has an interdisciplinary understanding of behavioural and cultural patterns across societies. She has a love for stories that capture the nature of human experience, through writing, media, or material culture. Outside of work, you can find her attending exhibitions, oscillating between overthinking and head-empty-just-vibes, or rewatching her favourite (usually Studio Ghibli!) films.


How much money can you save in 100 days? According to TikTok, the answer is as much as $5,000 if you take part in the 100-envelope savings challenge. 

Time

 Part of a wave of saving trends across FinTok (financial TikTok), posts featuring the hashtag 

 have racked up over 175 million views. Meanwhile, ‘what I spend’ videos on the platform regularly see comments asking for budgeting tips – as well as critics blasting creators for not being realistic enough.

These online conversations reflect an increasing desire to keep finances in order as the price of food and fuel continues to soar. 

Sky News

 Beyond TikTok, there has been an increase in the number of personal financial management apps over recent years, while subreddits such as 

 have seen significant growth. Such tools and forums are becoming more and more important, particularly as 64% of people globally expect to make ‘large’ or ‘small’ cuts to their household spending in 2023 as a result of inflation, with 89% of US adults who have financial goals for the year wanting to create and maintain a budget. 

YouGov

Morning Consult

While much research has been done on the psychology of budgeting, Dr. Chuck Howard, an assistant professor of marketing at the Mays Business School, and Dr. Marcel Lukas, a lecturer in banking and finance at the University of St. Andrews’ School of Management, wanted to find out whether budgeting actually works. They addressed this gap in knowledge in their 2023 paper, titled ‘

The Influence of Budgets on Consumer Spending

’, tracking consumer behaviour across several studies. “Budgeting is a great way for consumers to improve their financial wellbeing,” says Dr. Howard. “And with all of the economic uncertainty and financial precarity that households are facing right now, I think they can use as many tools as possible to help improve their financial decision-making, increase their savings, and, ultimately, live a higher quality of life.” Canvas8 spoke to Dr. Howard to find out more about budgeting and what his research means for brands.

What do we already know from existing research?

There's been academic research on budgeting going back at least 30 years. The past research tells us a tremendous amount about the psychology of budgeting, which, as a researcher and academic, is fascinating. But past research, it turns out, doesn't actually tell us anything about whether or not budgeting works in the real world.

So, my co-author, Marcel Lukas, and I were motivated to write this paper and run the studies within it because we really wanted to answer this question: do budgets matter? Can they actually influence people's spending? The academic literature was agnostic about that. I mean, there was always the assumption that they did, but there was no clear answer to that question, and that's the gap in the literature that we wanted to fill.

How did you go about conducting your study?

The first thing we did was partner with a personal finance app, Money Dashboard, which is based in the UK. What’s interesting about that app is that it’s not strictly a budgeting app, so lots of people will go in and set a budget, but then lots of people also don't. We looked at the data for Money Dashboard to see if the people who were setting budgets were subsequently spending less money than people who weren't. Then, we used some statistical and econometric techniques so that we could compare people who had very similar spending before they downloaded the app – grouping them to those who set a budget or didn’t. We were able to use this really precise personal finance app data to measure people’s spending to a high degree of accuracy.

In our second study, we partnered with a credit union in Vancouver, Canada, to run a field experiment where we randomly assigned some of their members to either set a budget for the next month or not. We then tracked everybody’s spending for the subsequent month.

In our final study, we ran what we call the financial diary experiment. We randomly assigned people to either set a high budget or a low budget at the start of a week, and we had them track their spending in a diary throughout that time.

Those three studies converge on the core conclusion of the paper, which is that budgets strongly influence spending. But the catch here is that almost everybody spends more than they budget. Although budgets strongly influence spending and help people reduce their spending compared to what they spent in the past, budget compliance has a lot of room for improvement. We’re all optimistic in terms of the extent to which we think we can change our behaviour. But it turns out that doesn't have anything to do with being an optimist per se.

Our theory is that when people set a budget for the future, they are, in part, forecasting how much money they will spend, adding up expenses that come to mind most easily, like groceries and rent. But, inevitably, there are atypical expenses that come up that you hadn’t accounted for when you initially set your budget. It’s very hard to think of all the things you’re going to spend money on in the future.

We also have this really fun finding – we measured buyer impulsiveness, and you would think impulsive buyers have weaker budget compliance than non-impulsive buyers, right? Well, they do, but not because they spend more money. It’s because they set lower budgets than non-impulsive buyers. That was kind of a twist in the data. Our interpretation is that impulsive people know that they’re impulsive, and they’re using their budget to try and reign in that behaviour by setting an extra-low budget. It’s a self-control device.

People shouldn’t get demotivated if they spend more than they budget. They shouldn’t abandon that behaviour. They need to know that it’s a really difficult thing to strictly comply with a budget, especially if it is very aggressive or optimistic. It's important for people to know that and keep themselves motivated to get as close to their budget as they can. People need to pick the right point of reference when evaluating their success. That’s important because it’s so easy to have just one month where you fail and then give up, and if you give up on it, your budget will never influence your spending and you will never decrease your spending and increase your savings, and so on.

What we found across all the studies is that it is a fundamental psychological process that underlines the influence of budgets on spending and the ability to make a more accurate forecast. It does happen to most people, but that also means that solutions can apply to most people.

As consumer confidence declines, people are making an effort to lower their spending, resulting in trade-offs to find the best possible value. In 2022, 24% of global consumers said they regularly sought out private-label and low-cost goods – up from 18% in 2021 – while 73% of Americans plan to keep buying from private-label brands, even when the economy improves. 

Euromonitor

Retail Dive

 Shoppers are more likely to be loyal to brands that demonstrate empathy and assistance – such as 

 on essential goods – while offering the best value for money. Exemplifying this is 

 – the retailer’s emphasis on competitive pricing, membership perks, and quality own-brand products has resulted in a 93% membership renewal rate and expanding customer base, even amid economic uncertainty. Meanwhile, Revolut has introduced an instant 3% cashback feature for its users, differentiating itself from other cashback schemes that may take days or even months to be redeemed. 

AltFi

Younger generations are facing high levels of burnout and anxiety – and money worries are a core concern, with 39% of Gen Zers and 34% of Yers citing their finances as a leading source of stress. 

Fortune

 Having experienced the worst inflation and highest interest rates in 40 years, many young adults are stressed about the future. Much of this is compounded by the fact that Gens Z and Y have lower financial literacy compared to older generations. While they feel knowledgeable about basic financial concepts such as saving, managing money, and budgeting, knowledge levels decrease on matters such as mortgages, investments, and building an emergency fund. 

Bank of America

 However, despite concerns around financial stress, a survey commissioned by Prudential found that nearly 70% of Gen Yers in the US don’t keep any formal budget to keep track of their finances. 

Prudential

 There is an opportunity for brands to alleviate this strain by demystifying financial literacy and empowering young adults to make better decisions. Platforms like 

 are educating young people in transparent and accessible ways. They’re stepping in to fill the gaps left by traditional educational institutions that have people turning to 

 of information – whether they’re trustworthy or not.

Encourage money management in easy, personalised ways

A study from Juniper Research suggests that 53% of people worldwide will access digital banking services in 2026, reaching over 4.2 billion digital banking users. 

Juniper Research

 As services that were once available only in-branch, such as loan applications and account openings, move online, people are increasingly viewing digital apps as significant components of a seamless banking experience. In 2021, a survey of Americans who used digital payment methods found that convenience (66%), ease of use (57%), and saving time (46%) were the leading reasons to harness such options. 

Chase

 Accessible platforms that address varied financial needs can build consumer trust, loyalty, and greater engagement. Fintech firms like 

 are already becoming one-stop shops that offer personalised tools to gain greater insight into where money goes. Other brands are taking customisation a step further, with Moneyhub and Aviva’s 

 helping customers view and manage all of their pensions in a single platform – useful for older adults who may need additional support in navigating digital banking. 

Fintech Finance News

Rising inflation and a looming recession have resulted in reduced savings and higher debt – in the US, credit card debt hit a record $930.6 billion at the end of 2022, representing an 18.5% annual rise. 

CNBC

 As a result, we’ve seen Americans tap into pandemic-era savings, having spent about 35% of the extra money they banked, with that proportion predicted to increase to 65% by the end of 2023. 

The Wall Street Journal

 Brands and businesses are recognising that this is a point of concern, and are providing support. Monzo launched an instant access savings account with a competitive interest rate of 3%, providing competitive rates without having to lock away large sums of money. 

 Meanwhile, employers including Starbucks are offering emergency savings options to workers, supporting those who don’t have a cash cushion for unexpected expenses. 

The New York Times

 of people globally expect to make ‘large’ or ‘small’ cuts to their household spending in 2023 

 of Gen Yers in the US don’t keep any formal budget to keep track of their finances 

 of Yers cite finances as a leading source of stress 

Budgets strongly influence behaviour by helping people reduce their spending compared to what they spent in the past

However, almost everybody spends more than they budget for, leaving room for brands to help improve compliance

Impulsive spenders have lower budget compliance – not because they spend more but because they set lower budgets

Dr. Chuck Howard is an assistant professor of marketing at Texas A&M University’s Mays Business School. An expert on consumer financial decision-making, he uses insights from his research to develop simple strategies that help people improve their financial outcomes.

Global

Money

Behavioural Sciences

The cost of living crisis has made people hyper-conscious about money, leading many to look for ways of better managing their finances. Canvas8 spoke to Dr. Chuck Howard about how budgeting influences people’s spending behaviours and what brands can do to support consumers.