The purpose of budgeting apps is to reduce spending, but they can actually have the opposite impact, research has shown.

Traditional budgeting apps can increase spending by almost a third (26 per cent to 33 per cent), according to research by Think Forward Initiative and Eller College of Management, University of Arizona.

The study found that people tend to spend more when they are certain there is money left in their budget, especially towards the end of the month.

It said that spending declines when budgets are “less salient,” for example when users can roll over money to the next period or split the budget period into smaller timeframes.

“Whilst budgeting apps are useful in addressing cognitive errors and motivational biases around memorising, calculating, creative allocation and budget (mis)interpretation, they add a new issue: certainty in available money,” said Anastasiya Pocheptsova Ghosh, assistant professor of marketing at Eller College of Management, University of Arizona. “Presenting users with a specific amount of money left to spend, frames it as a spending ‘goal’ which users feel they can ‘reach’. In simple terms, people tend to spend more when they are confident there is money left in their budget.

She added: “To better help consumers manage their finances, budgeting apps therefore need to be approached with care, or (re)designed with flexibility in mind – from flexible time periods to flexible budgets.”

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