Is There a Thrifty Gene?

Have you ever wondered why some people seem to be able to easily spend money on a whim, yet others are more frugal in their spending habits?

Even siblings, close in age, raised during the same time period, in the same environment, by the same parents, attending the same schools are often different in their levels of thriftiness.

For example, my brother is only 18 months older than I. We were both raised in the 1950’s by parents who were in their early adulthood during the Great Depression. Our parents were thrifty. Mom never considered brand name purchases when there was a cheaper alternative. Dad took his bologna sandwich to work for lunch every day instead of buying lunch (and even refused to buy a nickel candy bar to add to it).

Yet, my brother’s spending habits are so different than mine. He seems to let money just flow through his hands, constantly treating himself (when he has the funds) to things without consideration of future needs or wants. I, on the other hand, have difficulty spending money, even though we currently have more than enough to last a lifetime.

My hairdresser tells a similar story about her siblings – some won’t spend, others will.

Millionaires stay thrifty.

At least some people who become millionaires retain their frugal ways. We don’t hear about a lot of them, because, although they are rich, they aren’t famous.

However, you can read about millionaires who think food tastes better if someone else is paying for it, or who only buy used clothing, or who continue to avoid debt.

Then there are the stories on Money  that detail how some of those even on the Forbes 400 list maintain their thriftiness, from Zuckerbergs $30,000 car to Buffetts 1958 family home.

Habit or trait?

But is thriftiness a habit or a genetic trait?

Many things we once believed were the result of our conscious choices have turned out to have a strong basis in our genetic makeup. When old folks lost their memories and ability to recognize familiar people in years past, we thought it was the result of aging, now we know that some inherit a tendency to have Alzheimers. Age related blindness (macular degeneration) is now known to be mostly inherited.

High blood pressure and high cholesterol in some are almost predestined to happen based on genetic makeup.

Personality traits also seem to me to be somewhat genetic. After all, some babies are born smiling laughing and reaching out to people. Others are more reserved, subdued and shy. In fact a long term study found that some personality traits were found more than 50% of the time to be the same in twins, even though raised apart.

A more recent study summary posted by Science Daily reported :

“Genes play a greater role in forming character traits — such as self-control, decision making or sociability — than was previously thought, new research suggests.”

But what about a frugality gene – is it possible that our tendency towards thriftiness (or being a spendthrift) could be genetic?

There are scientists who actually study how are genes are related to our money. A relatively new field called neuroeconomics (which combines neuroscience, economics and psychology) is indicating that there may be a basis for genetic disposition towards frugality.

George Lowenstein, a professor of economics at Carnegie Mellon University is one of the people who studies frugality.

In a study he and the other researchers proposed:

“… that an anticipatory pain of paying drives “tightwads” to spend less than they would ideally like to spend. “Spendthrifts,” by contrast, experience too little pain of paying and typically spend more than they would ideally like to spend. “

Scott Rick (University of Michigan Ross School of Business and Ph.D. holder in behavioral decision research from Carnegie Mellon) was one of the researchers in another study which used functional magnetic resonance imaging (fMRI) to examine what goes on in our brain when considering the price of a desirable item.

The subjects saw a series of products and prices (like a box of chocolates) while the fMRI was in progress. Three parts of their brains were watched: the nucleus accumbens, which lights up in anticipation of pleasure; the medial prefrontal cortex, which fires to help when balancing gains and losses; and the insula, a part of the brain that registers pain.

Seeing products they liked caused the subjects pleasure centers to light up. When shown the price later for that item, if the price was higher than the person was willing to pay, the pain center activated, whereas if the price was lower, the part of the brain that balances gains and losses was fired (possibly indicating they were deciding to buy the item) and the pain center was less active.

While not proof that we are genetically disposed towards thriftiness, to me, the study links the genetic makeup of our brain cells to the amount of pain we experience when prices are too high.

We have a choice.

The bottom line, is that scientists are still exploring the idea that economic decisions may be inherited.  The jury is still out.

But, even if the way we spend or save our money is linked to certain genes, I (like my hair stylist when I asked her) believe that we still have a choice. I believe that we can be trained (or train ourselves) to display the appropriate amount of frugality (or ability to spend) for the situation at hand.  We can choose to develop the habit of thriftiness.

Scientists have found that those diseases which have a genetic base, may or may not be triggered in a person – depending on what that person chooses to do in his or her life.

I believe the same will prove true of any inherited spending tendencies. So, even if I feel uncomfortable spending, I can still decide to go ahead and part with the money. Likewise, even if I want to buy, buy, buy, I can still control the instinct to do so.

Do you think thriftiness can be inherited?

The Canadian Banks Are Not Working For You

From a shareholders perspective, the Canadian banks have been one of the safest and strongest performers in recent history. They were able to glide through the global economic downturn with relative ease, and continue to deliver exceptional returns each year.

From a customer perspective, the Canadian banks are pushing their borrowers deeper and deeper into debt. Canadians are now carrying record high consumer debt, often paying 20% interest rates on their credit card balance, while the big five banks’ profits have ballooned, eclipsing over $30 billion in 2014. Think there’s a relation between the continuing household debt with the Banks increasing profits?

Big Five Banks Profits vs. Consumer Non-Mortgage Debt

This lack of customer care has made the Canadian banks susceptible to technology disruptors.

Kevin Sandhu, CEO of Grouplend, recognized this in late 2012 when he came up with the concept of a technology enabled, data-driven platform that could improve the speed, convenience, and costs for Canadians looking to borrow money.

Why should someone with decent credit have to pay 20% interest rates on their credit card? Sandhu started the company with the belief Canadians needed a cheaper option to access credit, and by removing a lot of the costly overhead, legacy costs, deposit requirements, and other inefficiencies of the Canadian banks.

By using Grouplend to obtain a loan, with rates starting at 6.3%, averaging around 11.5%, and never going as high as a credit card, Canadians will save thousands of dollars on their debt.

Sandhu mentions, being the first company in Canada to offer this cheaper service gives a great advantage as Grouplend continues to educate Canadians about this new industry, but it’s hardly a reason to stop innovating. He maintained that being a new financial service in Canada, Grouplend had to create a way for people to understand all of their credit options without any commitments or requirements.

Canadians have long been discouraged for shopping around for loans and other credit products, as each credit inquiry potentially lowers a consumer’s credit score. Grouplend was steadfast in creating an application process where the applicant can obtain an instant personalized quote without affecting their credit score.

“Worst case scenario, someone loses 120 seconds of their life when they apply for a loan with Grouplend,” says Sandhu.

Grouplend continues to prove the banks’ archaic systems are no longer in touch with the Canadian market by moving beyond traditional underwriting metrics. Grouplend has taken the position that people are much more than just a 3-digit credit score. Their technology and proprietary algorithms analyze data points beyond just a credit report to get a fuller picture of who an individual is. Using this method, the company is able to offer borrowers personalized interest rates.

If the banks are the newest industry ripe for disruption, how far will this go?

Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.

In the future, will the worlds largest bank hold no money?