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Saving money isn’t exactly the most glamorous thing to do with your hard earned cash. A recent survey by Aviva found that 21% of us in the UK have no savings whatsoever. That’s almost a quarter of people who haven’t managed to put cash aside for a rainy day. And even those of us who have managed to put money aside may not be saving enough. The same Aviva research found that even those with retirement savings are around £9,900 short of the annual amount they need to live comfortably.
Research from the US identified that people are not naturally inclined to save money. This mostly comes down to a ‘Carpe Diem’ attitude i.e. we’re more motivated to live in the present and ‘seize the day’ than wait. So, rather than spending a bank holiday quietly doing nothing and saving the money instead, we’re more likely to book a crazy trip or a mini break or long lunches with friends. In fact, it’s occasion spending that often scuppers us. While many people are quite good at budgeting, we tend to overspend when it comes to ‘special occasions.’ You know that feeling ‘it’s my birthday, I’ll buy the dress’ or ‘my sister is such a star I’ll pay for the holiday.’ This can quickly reduce any savings we’ve managed to accumulate.
Another reason we’re getting worse at saving is the rising level of inequality in our society. Next-door neighbours might have the car, the clothes or the designer dog so why shouldn’t we have it too? Social media shows us the lives of the ludicrously rich and famous at Coachella or on a yacht or in their vast back garden swimming pool. Why shouldn’t we have our version of that? Not enough of us are saving and sensibly putting cash aside. Instead we’re blowing it as fast as our platinum credit cards and personal loans will allow. Apparently, we’re still trying to keep up with the Joneses (although now it’s the Kardashians) and that does not go well with saving.
It would seem that we’re put off saving by the amount of red tape involved too. Filling out a form to open a savings account feels troublesome – just one more thing to add to an already too packed to do list. We’d rather spend an hour doing something ‘constructive’ or fun than wasting time on a task that ultimately will mean we have less disposable cash. We also have a rather unnerving ability to not think about the future. When you’re 25, being 65 seems ridiculous. But today, given the poor situation with the state pension, this is the age that most of us need to start saving from. It’s this same ability to block out a future life that allows us to spend frivolously the cash that perhaps we’d planned to start that saving account with. Tomorrow never comes, right?
Although many of us share this poor saver trait, we really are very much alone individually with the consequences. Not putting money aside for a summer holiday means no summer holiday. If you haven’t saved for your wedding then you’ll need to have a budget affair. And if you don’t have enough set aside for retirement then it could be very difficult indeed. So, what can we do now to defeat the anti-saver in all of us and make sure that there is cash put aside for a rainy day?
Don’t unenrol yourself – every employee is now auto-enrolled into a pension scheme by their employer. Contributions are made by the employer and also the employee and the only way to stop this is to unenrol yourself. If you want to make sure you have pension provision above the state pension then don’t unenrol yourself. You’ll soon adapt to losing the small amount of cash each month.
Maintain your credit score – even if you don’t have savings or a great credit record you can still work on your credit score. This could help you get a better rate on future savings and financial products through which you can build wealth. Anyone with a poor score and no savings to cover costs can still obtain a bad credit loan. As well as helping you out of a sticky situation this is a good way to start repairing bad credit by making payments regularly and on time.
Visualise yourself in the future – that could be 10 years in the future or 30. Where do you see yourself living, how much do you want to have to live on, what expenses do you anticipate? Prepare a monthly budget for your future self and see what your income less your outgoings leaves you with. This can be an incredibly sobering experience that might be all the motivation you need to change the bad saver hard wiring.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read about Alex Hartley
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