How Keeping Up With the Joneses Can Help You Save Money

As a new parent, I participated in a parenting group where a father shared that he contributed $130 each month to his daughter’s 529 college savings plan. At that point, I had just initiated my baby son’s 529 account using a check from his grandparents, but I hadn’t thought about setting up a monthly contribution. After reviewing our finances to ensure we could manage $130 monthly, I established an automatic transfer.

Fast forward over seven years, and that monthly transfer is still in place. When my younger son arrived, we figured out how to also contribute $130 per month to his 529 account.

Little did the man next to me know that his casual comment would significantly impact my children’s college savings. This experience demonstrated how the desire to “keep up with the Joneses” can translate into a wise financial choice. Motivated by his commitment, I made efforts to align my savings strategy with his.

Although the idea of keeping up with the Joneses often receives negative criticism, this kind of financial rivalry can enhance your savings and improve your financial decisions. Here’s how you can leverage it for your benefit.

Understanding Anchoring

The influence of other people’s spending habits can strongly affect our financial choices—both positively and negatively—largely due to a cognitive bias known as anchoring. This tendency leads us to fixate on the first number or price we encounter, often treating it as a benchmark for what is considered “normal.”

In my instance with the 529 contributions, learning from the other parent that he set aside $130 monthly established that figure in my mind as a reasonable amount. If he had instead mentioned $30 or $350 per month, those figures would have acted as my new reference points for contributions.

Often, anchoring can work against your financial wellness when comparing yourself to others. For instance, if I had been discussing monthly car payments instead and someone mentioned they were paying $650 each month, I might have adopted that figure as the standard—possibly leading me to secure a car loan beyond my means.

Constructive Comparisons

If hearing about others’ saving or spending behaviors helps shape your understanding of what is normal or fair, here are two strategies to ensure your comparisons are beneficial rather than detrimental to your finances.

Seek Out Financial Role Models

Behavioral scientist Sarah Newcomb, Ph.D., author of *The Comparison Trap: How Social Comparisons Affect Our Financial Well-Being*, suggests that evaluating yourself against someone you admire—who is also similar to your situation—changes your perspective on financial differences. Rather than feeling inadequate compared to someone with greater wealth, you engage in an aspirational comparison that encourages you to mimic their positive financial habits.

Understand Average Expenditures Among Peers

Using platforms like Status Money allows individuals to obtain anonymous insights about their financial standing relative to peers. This can illuminate areas where you might be overspending according to broader averages, rather than being skewed by an individual’s financial choices. Gaining a sense of what’s typical among your peers can provide much-needed clarity on budgeting.

Choose Your Friends Wisely

We all have friends who may spend extravagantly, making it challenging to resist the urge to keep up. There are also companions who might encourage unnecessary purchases.

While it’s fine to maintain friendships with those who have different spending habits, it’s crucial to acknowledge how these influences can impact your finances and to strategize accordingly. Opt for gatherings like dinner parties or outdoor activities where the chance to overspend is minimized.

Instead, surround yourself with individuals whose financial approaches align with your goals. By doing so, you can harmonize your aspirations to save with your social life, eliminating conflicting desires.

The Joneses as a Constructive Reference

Striving to keep pace with the Joneses can be detrimental if motivated purely by a desire to maintain appearances in a spending contest. However, understanding the savings habits or spending patterns of others can serve as useful benchmarks for managing your finances. The key is recognizing when to utilize the examples set by the Joneses and when to disregard them.

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