Why do people think they can’t save?

Often, it’s not financial hardship that stops people saving – it’s a lack of know-how. Simple budgeting tips can start you on your saving journey. Wealth expert Tony Clark explains.

saving money


Today, in the UK, there are still 11.5 million adults with less than £100 saved. Financial wellbeing isn’t just important for your bank account, but it’s linked in a real way to your health, motivation at work and the wider economy.

Although it’s clearly a barrier, the inability to save is not always linked with financial hardship – sometimes it can be as simple as not knowing the fundamentals of budgeting. Once you’ve mastered these, saving becomes a lot easier.

How money worries can take their toll

In a speech, Andy Haldane, the former Chief Economist of the Bank of England, explained that every individual’s decision-making ability, patience, and ability to improve their education, skills and experience are heavily influenced by their financial environment.

Being worried about how to meet their day-to-day needs can consume ones ‘cognitive bandwidth’, basically reducing the amount of brainpower available to dedicate to work. In scientific experiments, these effects can even be seen where people were asked to merely contemplate suffering a financial loss.

When you lack the savings to see you through life’s ups and downs, workplace productivity is reduced and health can suffer in a very real way, which can lead to more sick days and less ability to generate income.

How to establish a saving mindset

People are psychologically wired to put current needs and wants over future needs. This ‘present bias’ means that despite those who are well informed about the need for financial planning, it can be difficult to successfully carry out the desire to budget, reduce expenditure and put money aside for the future.

Poor financial management can also be a vicious circle. Being in financial difficulty intensifies the focus on the here and now, which makes it even more difficult to think about future needs. This means that people already struggling end up worse off.

Earning more doesn’t necessarily help with saving either. People often adapt their lifestyles to fit their salaries and get used to a certain standard of living, whatever their income. For instance, someone on a salary of £25,000 might have living costs and spending habits that consume much of their income. If their income grew to £40,000, £50,000 or £60,000, they might subconsciously change their lifestyle to match their means and discover that most of their income gets used up.

The way around this is to realise that there is little correlation between higher incomes and increased happiness, once people reach a salary level where they can live comfortably.

After people’s basic needs and some of their lifestyle ‘wants’ are satisfied, spending more money on day-to-day ‘wants’ doesn’t really enhance life satisfaction.

How to budget

  1. Decide how much you want to spend each month and then make the distinction between ‘needs’ and ‘wants’.
  2. Save money first by a direct debit to a savings account immediately after payday, then live off the remainder by sticking to a budget.
  3. Think about your future ‘you’ by prioritising a pension. Extra disposable income today won’t make you any happier, but the future ‘you’ needs enough savings to live comfortably.

Tony Clark is a Senior Propositions Manager at St. James’s Place Wealth Management 

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