Linguistic Relativity, Meet Finance.

Linguistic relativity is the hypothesis that a speaker’s language determines how one perceives and conceptualizes the world. In a nutshell, it basically states that two speaks of two different languages see the world in very different ways, as determined by the structure of their language.

How is this relevant to finance? Well, a TED talk was recently posted (embedded below for your convenience) of economist Keith Chen who asked the question: does our language affect our economic decisions?

To find the answer, he designed a study — explained in detail here — and according to his findings, it does.

A main difference is between what he calls “futured” and “futureless” languages:

While “futured languages,” like English, distinguish between the past, present and future, “futureless languages,” like Chinese, use the same phrasing to describe the events of yesterday, today and tomorrow. Using vast inventories of data and meticulous analysis, Chen found that huge economic differences accompany this linguistic discrepancy. Futureless language speakers are 30 percent more likely to report having saved in any given year than futured language speakers. (This amounts to 25 percent more savings by retirement, if income is held constant.) Chen’s explanation: When we speak about the future as more distinct from the present, it feels more distant — and we’re less motivated to save money now in favor of monetary comfort years down the line.

Watch him explain more in the video below. It truly is fascinating.