Before the Money Arrives
Odysseus did not resist the song. He arranged to be held back before he could hear it.
Director Christopher Nolan’s The Odyssey reached cinemas this month, with Matt Damon as Odysseus and a cast that includes Tom Holland, Zendaya and Anne Hathaway. Odysseus is a Greek king trying to sail home after the Trojan War, and the journey takes him ten years, because gods and monsters keep getting in the way. One of those dangers is the Sirens.
The Sirens sing so beautifully that any sailor who hears them steers his ship onto the rocks and drowns. Before Odysseus reaches them, the goddess Circe warns him and tells him how to get through. His crew are to seal their ears with beeswax and hear nothing. Odysseus wants to hear the song and live, which no one has done, so he leaves his own ears open and has the crew tie him to the mast. He gives them one order. If he begs to be released, they are to tie him tighter.
The ship passes the rocks. He hears the song. He begs. They tie him tighter.
Odysseus did not fight the song, and he never tried. He settled the matter in advance, while his mind was clear, so that once the music started he had no way to act on it.
Odysseus’s crew used beeswax. These do the same job.
That same trick is still handed out today. The foam earplugs on a flight, or in a hotel drawer, keep the sound out before it can reach anyone. But most of what tempts a person cannot be blocked so cleanly.
Money is the hardest to shut out. In Singapore, the reminders are everywhere. A neighbour moves from a flat to a condominium. A colleague turns up in a new car, paid off over seven years and never mentioned. A holiday is posted from the beach before the bags are home. None of it looks reckless. Each step is a sensible upgrade on the one before. What people own is easy to see. What they owe is not. Unfollowing an account does very little. There is no muting a whole city.
If the song cannot be silenced, the only move left is the one Odysseus made. Take the decision away from the person who will be standing there later, wanting things. With money, that means moving it out of reach before it arrives, so that spending it is never really an option.
Singapore does exactly this to citizens and permanent residents. The Central Provident Fund, the CPF, takes part of each pay cheque before it reaches the hand. Nothing depends on willpower, because the money is gone before anyone can spend it.
What the state does by force, some people arrange for themselves. Nava Ashraf, Dean Karlan and Wesley Yin tested a savings account at a bank in the Philippines. Its one unusual feature was that it locked the holder out of their own money until a date or an amount they had chosen. Of those offered the account, 28.4 percent took it. Twelve months later, that group held balances 81 percentage points higher than the group that had not been offered it. They locked the door on themselves, on purpose.
Morgan Housel, in his bestseller The Psychology of Money, put it plainly. “Wealth is what you don’t see.” Spending is visible, and saving is not. A new car can be seen from the road, but the decision not to buy it cannot.
The neatest version binds money that has not arrived yet. The Nobel laureate Richard Thaler and the behavioural economist Shlomo Benartzi built a scheme called Save More Tomorrow, in which workers agree ahead of time to put part of each future pay rise into savings. Nothing is given up today. The pay rise is promised away before it lands, so there is never a moment of holding the extra money and choosing to be sensible. Among the first group who joined, saving rates climbed from 3.5 percent to 13.6 percent over four pay rises.
The CPF, the Philippine account and Save More Tomorrow are examples of what economists call commitment devices. Each is a decision made early that removes a later one.
Odysseus heard every note of the song. He had made sure, long before, that hearing it would change nothing.
Money rewards the same habit. The person who saves and the person who spends are the same person, met at different moments. Decide early, while the mind is clear and the money has not yet arrived, and the later self never gets the chance to spend it.
This article is for education only. It does not take account of individual circumstances and is not financial advice.