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.

Lol at me 'being stupid'

Rather than my mortgage company (a big bank) having enough staff to answer the phone so I could REDUCE my mortgage to the payment I agreed (instead of £2k overpayment) month

Yeah, all MY fault ....

I think it can be about what you spend most definitely rather than what you earn (to some extent). It’s about having good money management if you don’t have this skill well there’s not much hope. Also everybody’s way of living varies vastly some may spend £22 a month on a gym and some may spend £60.
If you have a mortgage and no savings that’s totally understandable and it’s still an asset if you ever needed to sell.

I've always been a saver, since my first job whilst still at school. Before I left home (at 22) I had enough saved to pay the deposit on the house and some furniture and still have a rainy day fund.

Over the years we've had some situations that could have been disastrous but if you have that cushion, you can usually get through it. Even serious health crisies are easier to deal with if you don't also have to worry about money.

I know I was fortunate to be able to save whilst living at home but I've always lived well within my means, it would really worry me to be spending everything each month. I'm not a big earner and had to support DH for a while during one of these crisies, so it's not that there's always been plenty to spare, I've just cut my cloth.

I understand others will think life for living, money's for spending but I think I've loved life better/happier knowing I have a bit of cash behind me.

I never borrow (apart from the mortgage which I always overpaid) which means my outgoings are kept low.

I save about £200 pcm. I have also helped put my sister nephew and niece in last year. My dd has now lost her job do I will probably help her with her mortgage until she gets another job. My dh also saves money each month.

[quote BluebellForest836]@Waxonwaxoff0 - train for a better job. It’s not impossible. I don’t know why anyone would go along in life thinking ‘yes, im going to aim to live on the bread line when I’m at retirement’ [/quote]
I don’t think people AIM to live on the breadline!! I think if you have a mortgage your doing just fine!!

A lot of high earners can’t even get on the ladder themselves.

I think in some areas people are house poor - too much of their income is going to paying for housing, so little is left after food, utilities, travel to work (that may change for some now more have been working from home but not everyone can do that).

Budgeting - sometimes people may think that savings comes after all bills/costs are paid but if they put savings at the top of their budget and did that first, then maybe more would go towards that. I think it's better calling savings an Emergency Fund. Having a financial cushion for when things don't go to plan is very useful. When I think of savings, I think of saving for something, like a car. Giving money a purpose I feel helps, so when I put money into my pension I know that is for my old age. Money towards my ISA is for when I decide to do less work, before my old age. So different pots for different things.

I have savings and am always aiming to save unless we can’t afford to

We occasionally have very little savings for example if we have saved for a wedding and then paid the bills, saved for a car and then bought it, saved for maternity leave and then on maternity leave.

It’s the getting into debt that’s worse than having no savings

@BluebellForest836

then life frugally when I'm older

Sounds shit.

Op we have savings, just incase but I think a lot of is that people just spend there money. It goes easily.. meals and drinks out, entertainment, clothing.
Some people prefer to live for the now instead of the future.

Lovely. What do you suggest that poster does about her "shit future"?

[quote BluebellForest836]@Waxonwaxoff0 - train for a better job. It’s not impossible. I don’t know why anyone would go along in life thinking ‘yes, im going to aim to live on the bread line when I’m at retirement’ [/quote]
Ah yes, the MN usual "train for a different job" maybe waxon can't afford to retrain. It's not always that simple you know.

To be honest I think most people essentially adjust their outgoings, or crucially expectations with salary so the more you earn the more we spend. On a high 5 figure family income we should have been able to save because none of our fixed costs had changed from when we earned half but we simply spent more. In fact exh was surprised I had made any savings (I had saved £200 a month for years into my account because I knew he would otherwise spent it on unnecessary consumer items!) he was happy to get half of course!!! I'm fortunate that dp and I don't need to think about money too much but he's not a saver either (is it just men???)

Longterm disabled, esa and pip together pays less than 9k a year.

I’m co fused as if everyone just adjusts their outgoings for what they have coming in leaving them with no savings, what do they do when the boiler needs replacing or the car needs new tyres or they fancy landscaping the garden or going on a big holiday?

People surly have to save for these things too

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

I dont think this is true for everybody. If you have £10k,£20k, £30k+ in the bank you are hardly going to tell people are you? Given so many people are in debt they might ask to borrow some.

For some people it's that they really just dont have spare money.
For the people I know it's about priorities or wastage. They can afford nights out, car modifications, cigarettes, booze.

I think it's very important to have savings especially when you have children. Also life insurance.

Im on a very low wage and dont have a job to return to after furlough ends. I live frugally and pay my bills and have nothing left to save. Living costs, bills and debts. Not sure why people with a high disposable income wouldnt have savings though.

I think - for the people you are talking about, that earn more than they need for rent food and basic bills, then it is down to people's attitude to money, a lot of which will come from their upbringing and experiences in life. But some is linked to their personality.

I was watching one of those 'Emergency' programmes last night and the ambulance were called to an overturned BMW. The driver was miraculously unhurt and had walked away, but the whole conversation when his partner arrived, and her Mother I think it was, and from him, himself, was concern over his wrecking the car for which she'd paid £17 000 last year and put it on finance.
Now, if you have saved £17 000 and choose to spend it on a car, then fine - totally your choice, but my mind can't compute taking out a car loan for a £17 000 car. If you don't have that much money, then why not buy a car for a fraction of the amount ??? I don't get the mindset of putting yourself in debt for something that will depreciate so quickly and something that is easily substituted for something that cost a fraction of the amount.

I'm on an ok wage, but a messy divorce followed by a nasty custody battle left me £20k in debt. I pay off about £1k as year as that's all I have spare after bills/mortgage etc. I know a few people in my circle in a similar situation. But it was either get into crippling debt or lose primary custody of my DC. That's worth more than savings to me.

What your really asking is about choices when people have that choice to make. It’s not about the huge amount of people who do not have a choice and can’t save regardless of if they want to because it’s not possible.

DH and his sister are the sort your asking about, both high earners but with wildly different attitudes to money. He says a good example was she would buy cola in an airport bar that was wildly over priced, he just wouldn’t because he was ok to go without and have something cheaper.

His sister has terrible impulse control, she bought a timeshare in Bali for instance and has never used it. She has never bothered with a pension, both he and I did from very young. They grew up together in a very comfortable household, why are they so different? I have no idea.

Both DH and I are very money savvy, we are not impulsive and both of us earned decent decent wages. We also dabble in investments and had a couple of years of amazing luck.

I suppose we have quite simple tastes thoug. The one thing we do spend a lot on are holidays.

Depends on the individual.

Some earn lots but spends lots so little in savings for a 'rainy day'.
Some earn little but have a small amount spare and save it.

I worked in a bank/building society for many years. I have seen people that appear to have lots of money with a very high level of debt, a small blip and they are finished, even some of the people that earn lots.

I do think some of it is about priorities though. My B and SIL seem to have to keep up a 'lifestyle' and they never have any money at all.

What you're really asking is about choices when people have that choice to make. It’s not about the huge amount of people who do not have a choice and can’t save regardless of if they want to because it’s not possible.

Yes.

DH and his sister are the sort you're asking about, both high earners but with wildly different attitudes to money. He says a good example was she would buy cola in an airport bar that was wildly over priced, he just wouldn’t because he was ok to go without and have something cheaper.

I am absolutely your sister-in-law in that scenario!

His sister has terrible impulse control, she bought a timeshare in Bali for instance and has never used it. She has never bothered with a pension, both he and I did from very young. They grew up together in a very comfortable household, why are they so different? I have no idea.

Gosh, that's crazy! I'm much more frugal than my siblings and hate wasting money.

I was thinking the same thing OP - mine was prompted by the new martin moneysaver financial intro course on open uni which said that the UK has one of the worse savings ratios in the EU, with our average being 0.37% of disposable income c/p to an EU average of 3.7% & highest examples like Sweden at more than 15%, Germany nearly 11% etc. Even if you think of things like high childcare, fairly high tax (which is much less than some of the nordic countries), lowish wages this still doesn't explain why we are so incredibly low - less than 1%, particularly when Ireland who has fairly similar tax etc. is 5%.

I posted a few months ago on a similar topic and stated that fair enough if you were on the bones of your arse, but if you were one of the more than 60% of British people who had at least one foreign holiday (or even the nearly 90% who had at least one domestic holiday) last year, or the huge percentages who lease a car on finance (avaerage cost £226 p/m), or who have a mobile phone contract above the say £15 p/m that can get you a good mid range smartphone and bundle, then you have really no good excuse for not having savings, you could have afforded to save but you've just prioritised different things.

Of course then I just got a load of replies from posters who hadn't left their town since 1992, used a eighth-hand nokia 3310 and drove a 11 year old ford focus with 180k miles on the clock, completely missing the point.

Although, got to say, with interest rates being so low for years and it being so easy to get credit, plus the limit on savings with regard to claiming benefits/care home fees, etc.there's not really much incentive to save from the government...

I am absolutely your sister-in-law in that scenario!

Oops - I mean I am NOT your sister-in-law…

Of course then I just got a load of replies from posters who hadn't left their town since 1992, used a eighth-hand nokia 3310 and drove a 11 year old ford focus with 180k miles on the clock, completely missing the point.

Sounds fairly typical...

Never used to have any saving but we decided to stop being rubbish with money. Paid off our overdraft, shrunk our debt and we were able to manage OK when I lost my job due to ill health.

Now I'd never be without savings, less than £10,000 and I feel twitchy. Twitchy at the moment due to Covid-19 though. Life is better knowing you can cope with the unexpected.

I think it's normal to have savings. It's also far to normal to not earn enough to save.

I earn decent money but throughout my 30s: 2 maternity leaves, London rent, DH redundancy, a house move and subsequent renovation ate all our savings.

Now: just turned 40 and have a surplus for the first time. 8 months saved.

Am very financially literate, but it was 10 years of making a different choice than saving to get us to where we are now. And (as much by luck as judgement, I'm sure), I don't regret the years of waiting for payday!