Savings

[UnaCorda]

It seems that very few people have a financial cushion of any sort and I'm curious as to why this is. I understand that some people are on a low/minimum wage or perhaps have unexpected outgoings, but there must be a lot of people to whom this doesn't apply.

Is it simply a matter of priorities? Is the cost of living simply too high to allow most people to save? Or do most people just spend most of their salary every month, regardless of any pay rise?

Or am I wrong and most middle-income or high earners do have a decent amount put away for the proverbial rainy day?

Disclaimer: I'm not asking this from the position of having a six-figure salary (or even a particularly high five-figure one) or a high-earning husband or a trust fund, etc.

Also, obviously people's financial situation could be completely different at the moment, so I suppose I'm referring to a pre-Covid situation.

We have savings in excess of your suggested but there have been times in our lives when we haven't for various reasons, some in our control and some out of our hands.

I am a naturally cautious person and saving is important to me but dh is of the thought that life is sometimes short and we only have a finite time when the children are young and when we are young - this was emphasised when I nearly died of meningitis when the children were primary school aged.

People live to their means, you earn more you spend more, you get gifted money you find something to spend it on!

@LaurieFairyCake

Earn way above national average and never have a penny in savings

Instead overpay hugely on mortgage

But it's not accessible so not savings

Covid halved our income in a way that nothing except actual death would so ended up with a 7k overdraft until we could stop overpaying the mortgage - they took 3 months to answer the phone because of all the people who had to have an actual mortgage holiday

So now 7k in debt which we couldn't prevent, now paying it off much slower than it accrued due to income not recovering yet

Incredibly stupid to overpay on mortgage and have no savings. I guess this was the financial illiteracy op was thinking of.

Never had a huge salary, in past times (as single parent) was living from pay cheque to pay cheque and even then had to have credit cards...just to pay the extra bills. Savings were a pipe dream.

Once salary was slightly better and children left home, I used any salary extra to pay off credit cards.

Still unable to afford anything other than rent, and a lease car even now...I have a tiny bit of savings (and I mean tiny) but with retirement looming and furloughed I'm already digging into the few extra pounds I have.

When I get to state pension age, my biggest hope is that I can live such that my bills equal my state pension. But I will be content with that....

I suppose one of my regrets is that I never thought about or started saving when I started my career. Typically I went out enjoying myself and spent what I earned.
Following a divorce and finding myself hurtling towards 60 years old luckily I do have a permanent job now. The pay is above minimum wage, but pro rata so my salary is not large.
I do not have a mortgage, if I did I would not be earning enough to live on to pay one and cover all bills and living costs.
I manage to save some months, but as others have said sometimes you have to dig in to them to cover unexpected costs.
I am concerned about how I will survive on a small personal pension and state pension in the future.

I have next to no money to spend once my money has gone on essential outgoings (rent, bills, food, etc). Not been on holiday in god knows how long, I don't drive, and I can't remember the last time I bought myself new clothes. I'm proud enough of myself that I manage without getting into any debt, but terrified of what would happen if landlord decided to sell up. I don't think I've ever had savings.

I was a single mother on benefits. My dad is a huge saver and always told me to tax myself. In the early days I saved 50p a week, when I got a job I saved £10 a week. As my waged increased I saved more. The savings have taken a few hits over the years (30 years later) I have a small amount of savings and it make me feel safe.

I'm still a single mum.

[quote Seychelles98]@UnaCorda so what's your situation then? You haven't volunteered any information about yourself but have asked plenty of questions of others instead... you say you're curious, it's not that hard to work out surely unless you're not very bright. Are you a journalist?[/quote]
My situation is that I've worked in charities, the arts and education (so not mega bucks), have no debt, about two years' salary saved and paid off my mortgage (expensive city) before I turned 40. I now work part-time and go on lots of holidays, theatre trips, meals out, etc.

Which is why I don't understand why people who earn two or three times my salary never seem to have any money or savings. (Or it could be because I'm a bit dim, as you suggest.)

I have a small amount of savings and it make me feel safe.

I completely agree that having savings can be a psychological security measure. I've always hated the idea of being in debt, and never have been, even as a student. My parents' business went through a very difficult time in the early 90s and I think seeing them worry had an effect on me.

For those who technically have the income to save but don’t, it requires a change in mindset. Being overdrawn/student loan/etc from student days, normalises being in debt for many. Lifestyle creep eats into small pay rises and instant gratification/life’s too short mentality as mentioned by PP.
Personally, whilst I always understood that I should be saving there was always something else to spend my money on, or I only saved for specific short/medium term goals rather than savings for the sake of saving (aside from pension). It was only when I got a reasonably significant pay rise that I made the decision to put the majority of that increase in savings before I got used to having it disposable, and it then became a habit.

Our rent is 50% of our income. It is not even a nice place, pretty crummy tbh. I am stuck with very part time work due to a chronic lifelong condition. DH earns living wage, is trying to find something else but all of his experience is retail or warehouse. He does have a degree.

Our only luxury is that we have monthly cinema passes but that costs £30 a month and we don't go out otherwise. No takeaway coffee etc. We don't go on holiday. Our council tax increased by 8% alone last year. Food has gone up.

The problem was we did have savings but then several things went wrong, one after another and had to use them. Then we built up a bit again and had to use them when DH was furloughed as we had nothing else to cut back (cinema pass was paused during this). He always took leftovers for lunch and walked there and back, so no savings there.

It is basically cost of living is too high for us to save much and then one emergency and it is all gone again. I have applied for a much better job starting in Septemver which will give us an extra £150 a month, which will all go into savings.

In our case we were great until I became disabled as I was the higher earner.

I sort of get what you mean OP. To be honest though Its only been in the past 5 years when I decided I wanted to buy a house that I got in the habit of saving. Ive since bought a house but continued saving a regular amount, I'm on £30k a year and save £250 per month. It goes straight from my wage to a credit union and I have no idea how much is there. I try not to know unless I need to as I'd be tempted to spend some of it on rubbish!
It's taken me a while to get on top of my finances but I'm now managing well. I also over pay on my mortgage buy around £80 per month (rounded it up), have a very good work pension and a £2k credit card incase of emergencies that I've never used.

I earn just over £40k, so not particularly high, but I save at least £500 a month. My husband saves about the same.

We've only been in the position to in the last year as I was earning £22k so had absolutely nothing left. We have about £20k between us, I think.

I don’t think @LaurieFairyCake is stupid!!! That is harsh. No one could have predicted covid and had her income not dropped, they would be making a huge dent in their mortgage, saving thousands in interest and having a mortgage free house while still earning. A good plan!! Also means not tempted to dip into savings as they are all on the mortgage. A crystal ball would have been useful but not an entirety ridiculous plan!!
I also know plenty of people who rent and don’t have savings, this is surely worse?

Last time I moved to relocate for a new job
With all the expenses that this entailed

The second day of my new job, my old banger car broke beyond repair
Taxi to work that day
I purchased another old banger that week
I didn't wish to be late & give my new employer a bad impression

I also bought fridge & some other white goods

A year later central heating was installed

A couple of years later I have managed to build up some savings again by working overtime & cutting back in some areas

Due to cuts there is no overtime available this year

Not everyone is in a position to save

I have been fortunate that my relocation has paid off so far & there have been no job cuts so far

Some of my friends have not been so lucky in other industries

*LaurieFairyCake

Earn way above national average and never have a penny in savings

Instead overpay hugely on mortgage

But it's not accessible so not savings

Covid halved our income in a way that nothing except actual death would so ended up with a 7k overdraft until we could stop overpaying the mortgage - they took 3 months to answer the phone because of all the people who had to have an actual mortgage holiday

So now 7k in debt which we couldn't prevent, now paying it off much slower than it accrued due to income not recovering yet*

This could have been prevented if you'd given yourself a savings' cushion instead of overpaying mortgage. I expect the interest rate on your overdraft is a tad higher than your mortgage.

The best bit of advice I was given when I was promoted at work was to transfer the extra pay each month into a savings account as I'd managed financially before. I built up a 6-month cushion before I dipped into it and then topped it up again. I would've panicked without a safety net but I accept lots can't do this.

I guess the reason is obvious. Its because their income matches their outgoings. For some thats because they dont earn very much, but also many of the higher earnings spend all their disposable income.

@willowdeandickson - That's interesting, thanks.

We are in the lowest income decile (i.e. 90% of the population have more money than us) but we still save £100 per month (in Help to Save accounts).

So there can't be many people it's actually impossible for; it's more usual that they have a certain lifestyle they want to maintain and don't see some things as optional.

I think DH and I fall into the category you're thinking of, both moved in together early twenties and just spent our disposable income on things we wanted, didn't think twice about not having savings.

Then mid twenties started to mature a bit and we decided to save and buy a house to rent out as a pension plan. Tbh we didn't realise just how much the renovations would cost so used the little savings I had on deposit and fees. Then begged and borrowed to get the house renovated, sleepless nights and tears but pulled it off so now have decent equity in it but no savings.

Now early thirties and with kids made us realise the importance of having so accessible money behind us, currently have about £4K in savings and overdrafts available if needed.

But like PPs have said that pot is there to be dipped into for repairs etc so I can see it fluctuating in the future but hoping to keep building it up.

My income consists of my OAP and a very small pension. Not much to spare at the end of the month but I have gone without things to enable me to save £10k. This is what it currently costs to go to Dignitas in Switzerland.; I am terrified of getting dementia and being stuck in a home like a vegetable. At the first sign I will get on a plane and won't be coming back.

Most people live beyond their means and don't manage their money well

Do we spend £40-80 on takeaways a month? yes

Do we buy more food/snacks than we should, probably equalling £20-40 a month? Yes

Do we tend to buy the latest models for things rather than a more "affordable" one? Yes

Do we spend hundreds on alcohol? Yes

People have different attitudes to money. Could be upbringing or personality.*

We have savings but DH and I have been self employed for a very long time.

It would be hugely irresponsible to spend what we had available because business could dry up at any minute.

Turns out we were right but Covid has been a nightmare for us. I'm glad we had a rainy day fund.

*(Obviously this isn't talking about people on low incomes but when people could save if they wanted to.)

How many people choose not to pay into a company private pension ?

People are living longer

Why do you think that all companies of a certain size now have to offer their employees a minimum contribution to a pension

Some people still can't afford or choose to opt out