That Americans don’t save enough money is a truism. But why don’t they? The answer is a complex mix of macroeconomics (incomes have stagnated for many workers over the last few decades), culture (Americans are notoriously conspicuous spenders), and policies (two-thirds of workers are at companies without retirement plans).

But another variable is the challenge of giving up the gratification of immediate spending for the security of future savings.

A new paper finds that two biases prop up many people’s disinclination to save: "present bias" and "exponential-growth bias."

Present bias is a straightforward idea. People claim they’re willing to embrace all manners of self-control—saving money, working out, cleaning their room—provided that they don’t have to do so immediately. It is like the regularly scheduled conversation I have with my dentist.

  • “Do you want to floss more in the coming months?” Yes.

  • “Do you want to floss next week?” Yes.

  • “So I assume you flossed yesterday.” Um.

The commonplace name for this behavior is procrastinating. But academics, ostensibly paid by the syllable, favor the terms “hyperbolic discounting” or “time-inconsistency.” The only distinction between flossing next week and flossing right now is the passage of time, and yet it makes all the difference in my attitude. Researchers in this study found the same attitudinal difference among their participants. When they asked people if they preferred $100 today, $120 in 12 months, or $144 in 24 months, they found that about half of respondents took less money if they could have it immediately.

But is holding out for more money always the right decision? For many low-income people, taking the money immediately might be the rational choice. For example, perhaps buying that week's food and groceries with $100 and not suffering for a few days is worth more than the $44 they're leaving on the table. I have no doubt that many Americans suffer from time-inconsistent modes of thinking about money, but the bias deserves context. For some people, spending money on new clothes is a choice between shopping and saving for the long term. For others, spending money immediately on food and shelter is the only option.

The second bias that the researchers consider, exponential growth bias, isn’t a cognitive bias, perhaps, so much as a failure of math. They found that 75 percent of participants in their study didn’t understand compound interest, the principle that even small annual growth over a long period of time yields surprisingly great returns.

It’s intuitive to most young people that saving $100 now is better than saving $100 the year before they retire. But most people underrate the benefits of compounding interest. Saving $1 at the age of 20 is twice as valuable in retirement as saving $1 at the age of 40.

The rule that has stuck with me (although I can’t remember where I heard it) is the 2-20-50 rule. Two percent annual growth might sound shockingly meager. But a sum of money that grows by 2 percent each year for 20 years will have increased by about 50 percent.

It’s important to consider these biases in the context of history. There are massively different savings rates all over the world, and the decline in saving in the U.S. has happened within the last few decades. Americans in 2016 cannot blame their inability to save entirely on cognitive biases, because the human brain hasn’t changed all that much since the 1970s. The responsible way to think about these effects is that they are ingredients in the socioeconomic phenomenon of low savings rates. But they are not the sole ingredient.

Finally, what should policymakers do about low savings in the United States? The U.S. credit and banking system makes it far too easy for unsophisticated consumers to screw up their finances. Many companies don’t have 401(k)s, or they make them opt-in and don’t adequately explain the benefits of putting away more money, or they make it easy to draw down funds whenever their workers desire. Many credit-card companies offer contracts with absurdly low minimum payments, which often induces less sophisticated signers to incur large penalties for not paying off the full amount. These policies “nudge” people to be bad savers. Rather than nudge back, consumer protection agencies should just change the rules, for instance raising minimum payments for most customers. The U.S. could also step in to force Americans to save more through expanded Social Security. It’s an idea worth considering. Let’s talk about it next year.