A Joint Account With My Future Self: Self-Continuity Facilitates Adjustment of Present Spending to Future Income Changes

Schanbacher, A, Botti, S and Faro, D (2024) A Joint Account With My Future Self: Self-Continuity Facilitates Adjustment of Present Spending to Future Income Changes. Journal of Consumer Psychology, 34 (2). pp. 264-280. ISSN 1057-7408

Abstract

Is consumers’ present spending influenced by future changes in their income? From an economic perspective, consumers should reduce present spending when anticipating a future income decrease and boost spending when anticipating a future income increase to maximize their welfare. We find that although consumers tend to adjust their spending to a future income decrease, they are less likely to do so to a future income increase. We show that this is in part due to a low sense of self-continuity, a tendency to view the future self whose income increases as if it were a different person and, as a result, to categorize present and future income into two separate mental accounts. Enhancing self-continuity leads consumers to combine present and future income in a single mental account, and thereby facilitates adjustment of present spending to a future income increase. Whereas prior work linked high self-continuity to reduced present spending, we identify a context in which high self-continuity can boost present spending. We discuss the implications of these findings for consumer well-being.