Person trapped in a piggy bank, unable to enjoy life.

Why Saving Too Much Money Could Be Hurting You: The Psychology of Scarcity

Elliot Brynn in Mind & Education August 2025 • 4 min read.

"Discover the hidden motive behind underspending during tough times and how it impacts your financial well-being."

In a world that often glorifies saving, it's easy to assume that the more you save, the better off you'll be. We are constantly bombarded with advice to cut expenses, stash away every extra penny, and build a hefty nest egg for the future. But what if this relentless pursuit of saving is actually backfiring, leading you to miss out on opportunities and experiences that could enrich your life right now?

A recent study has shed light on a fascinating phenomenon: people often underspend during hard times, clinging to their savings even when those resources could alleviate their current struggles. This behavior isn't simply about being frugal; it's rooted in deep-seated psychological mechanisms that prioritize resource preservation over present-day well-being.

This article will delve into the intriguing psychology of scarcity and explore how our innate desire to preserve resources can sometimes lead us astray. We'll examine the research behind underspending, its potential consequences, and strategies for finding a healthier balance between saving for the future and enjoying the present.

The Hidden Motive: Why We Hoard Resources

Person trapped in a piggy bank, unable to enjoy life.

The tendency to save is undoubtedly a crucial component of financial stability and is necessary for navigating unexpected events. However, numerous behavioral studies have shown how people will usually spend too much because they don't account for how they discount their future. However, there is a motive to preserve their savings that makes them want to spend too little in the hard times. This is because of an instinct that has existed since the beginning of time.

This "resource preservation" motive stems from our evolved psychology, which is deeply intertwined with the concept of ownership. When we save money or accumulate resources, we feel a sense of control and security. It is this ownership that creates a barrier to spending, as depleting our reserves feels like a loss of control.

Ownership and Control: When you save a resource, you gain a sense of ownership and control. Spending it feels like losing something valuable.
Loss Aversion: People tend to feel the pain of a loss more strongly than the pleasure of an equivalent gain. This can make spending savings feel particularly undesirable.
Mental Accounting: We often mentally separate our money into different "accounts" (e.g., "emergency fund," "vacation savings"). This can make it difficult to transfer funds from one account to another, even when it would be beneficial.

Imagine that there is an economic game where there are uncertain incomes and consumptions yields diminishing returns within each day, this will create tradeoffs between spending and saving. What was discovered was that participants spent too much after windfalls in income, consistent with previous research, but they also spent too little after downturns, supporting the resource preservation hypothesis.

Breaking Free from the Scarcity Mindset

Underspending can negatively impact your enjoyment of your current life. It may cause you to not address the needs of yourself in the present time. Recognizing the power of the scarcity mindset and actively challenging its grip on your financial decisions is crucial. Create a financial plan that balances your future savings and your present needs. This will help you create a path to enjoy both now and later. By understanding these underlying psychological forces, you can make more informed and balanced financial decisions, ensuring that your savings empower you to live a richer, more fulfilling life, both today and tomorrow.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.1016/j.cognition.2018.10.028, Alternate LINK

Title: Spending Too Little In Hard Times

Subject: Cognitive Neuroscience

Journal: Cognition

Publisher: Elsevier BV

Authors: Alessandro Del Ponte, Peter Descioli

Published: 2019-02-01

Everything You Need To Know

What is the "resource preservation" motive and how does it influence our spending habits during tough times?

The "resource preservation" motive is a psychological drive to hold onto saved money and resources, especially during perceived hard times. This stems from a sense of ownership and control over those resources, making people hesitant to spend, even when it could improve their present situation. This behavior is rooted in how we've evolved to prioritize saving in the face of uncertainty.

What are the main psychological factors that explain why people hoard money even when they need it?

Several psychological factors contribute to hoarding money, including "ownership and control", where saving creates a sense of security, and spending feels like a loss of something valuable. "Loss aversion" amplifies this feeling, as the pain of losing money feels stronger than the pleasure of gaining an equal amount. Additionally, "mental accounting", where we categorize money into separate 'accounts' like emergency funds, makes it difficult to reallocate funds, even when beneficial.

How can underspending, driven by a scarcity mindset, negatively impact your enjoyment of life?

Underspending, driven by the scarcity mindset, can negatively affect your enjoyment of life by causing you to not address your needs in the present. It prevents you from using your resources to improve your current situation, impacting your well-being and potentially leading to missed opportunities for personal growth and happiness. In contrast, failing to save enough money can lead to financial insecurity later on.

What are some effective strategies for breaking free from the scarcity mindset and achieving a healthier balance between saving and spending?

To break free from the scarcity mindset, recognize its influence on your financial decisions. Actively challenge this mindset by creating a balanced financial plan that accounts for both future savings and present needs. Understanding the psychological forces at play empowers you to make more informed financial choices, ensuring your savings contribute to a richer, more fulfilling life both today and in the future. This might involve setting spending limits for specific categories and treating yourself regularly.

What did research discover about spending habits after both income windfalls and downturns, and what does this suggest about our financial behavior?

Research indicates that people tend to overspend after windfalls in income, but they also underspend after downturns, which supports the "resource preservation hypothesis." This suggests a tendency to hoard resources during economic uncertainty, even if it means sacrificing current needs and opportunities. This behavior highlights the psychological bias towards preserving resources, regardless of its impact on present-day well-being. Further research on the impacts of underspending is necessary.