If you’ve ever had trouble hitting a savings goal, you’re not alone. About half of American households are at risk of not having enough saved for retirement. Even among high-income Americans, 41% don’t have adequate savings for an emergency.
Saving for the future can be difficult because of a cognitive bias known as hyperbolic discounting: our tendency to place greater weight on immediate satisfaction, even if focusing on the long term will have a greater payoff.
Unfortunately, these shortsighted decisions on spending versus saving can have large effects on our ability to achieve our future goals, because of the enormous power of compound interest. So, let’s talk about what you can do to keep saving when you feel the urge to give up.
This post originally appeared at Morningstar.