Do you want to save more and work less?

PUBLISHED: 11:31 30 November 2018 | UPDATED: 11:31 30 November 2018

A worryingly large number of adults have what we know better as a live for today attitude, says Peter Sharkey. Picture: Getty Images

A worryingly large number of adults have what we know better as a live for today attitude, says Peter Sharkey. Picture: Getty Images

Graham Oliver

Living for today doesn’t pay the bills, says Peter Sharkey – but you can make your money work for you.

News this week that over the past 12 months individuals have saved, on average, just £8 a month, or £96 a year, served to confirm that as a nation, we’ve experienced the worst national savings rate this century. Not since 1999 have we saved less per head; even during the depths of the financial crisis, we were squirrelling away £166 a year.

Even that isn’t much though, is it?

According to the Money Advice Service, four in 10 UK adults have less than £500 in savings to cover an unexpected bill, while almost three-quarters of working-age people have not set aside a savings ‘buffer’ of three months’ income.

Furthermore, the corrosive effects of inflation only make matters worse. Inflation has averaged around 2.4pc this year, a rate you’re unlikely to match assuming you’ve deposited your £96 in a bank account, where you’re lucky to receive 1pc in interest. This means you’re losing money as the value of your cash savings has declined by the difference between the two, ie around 1.4pc.

Considering the longer-term consequences of a perilously low savings rate, it’s amazing that people don’t put more away each month.

The most obvious of these consequences concerns the state pension, about which more in a second, but perhaps most working-age adults don’t bother to set money aside because they possess what a recent American survey called a “present-fatalistic time perspective”. I didn’t have a clue what that meant at first, but to translate: a worryingly large number of adults have what we know better as a ‘live for today’ attitude.

People who adopt such an approach are, according to the survey, “less likely to save money because they live in the present, feel that lessons of the past are irrelevant and feel powerless to change their future.” As a consequence, they “feel that money and saving for the future does not matter.”

That’s all fine and dandy, but are these people expecting the rest of us to bail them out when they run out of money, or don’t have any pension? Couldn’t happen? It could – let me explain.

First, take a look at the Pension Clock on the moneymapp.com website. You will note that as of today’s date (November 30, 2018), there are 14 years, four months and four days before the UK’s pension pot, aka the UK National Insurance Fund (NIF), runs dry. To quote the website: “This is no wacky, attention-grabbing prediction. The forecast was made by the government’s own advisers early in 2018.”

The NIF was created in 1948; unfortunately, since day one, it has operated on a pay-as-you-go basis. This means it pays pensions out of money it receives from those currently in work.

Seventy years ago, this didn’t seem to matter much. The average male lived until he was 66, while women could expect to be around until they reached 71. Considering that men retired at the age of 65 and women’s pensions were much lower than those paid to males, few people doing the calculating considered a pay-as-you-go pension system a problem.

That was until the baby boomers started arriving and dramatic medical advances pushed life expectancy beyond anything the people living and working in the immediate post-war era could imagine. Today, female life expectancy is 83 years; for men, it’s 79.

The effect, of course, is to blow the original calculations to smithereens because we have an increasing number of people living much longer than anyone could have imagined back in 1948. Meanwhile, the number of workers making National Insurance Contributions is falling as the number of people receiving pensions is increasing. Even those endowed with a “present-fatalistic time perspective” can see that the arithmetic just doesn’t stack up. Numerous studies have shown that one common characteristic displayed by people who don’t save is the complete absence of a reason to set money aside. Without an all-important savings goal, they have no reason to choose saving ahead of spending.

Yet a savings goal motivates people to save for a specific purpose. It could be buying a car, a bike, clothes, anything. It could even be saving for a pension, because most adults of working age can probably forget collecting one from the state when they retire. And that includes those who live for today.

For more financial advice, check out Peter Sharkey’s regular column, The Week in Numbers.

0 comments

Welcome , please leave your message below.

Optional - JPG files only
Optional - MP3 files only
Optional - 3GP, AVI, MOV, MPG or WMV files
Comments

Please log in to leave a comment and share your views with other Dunmow Broadcast visitors.

We enable people to post comments with the aim of encouraging open debate.

Only people who register and sign up to our terms and conditions can post comments. These terms and conditions explain our house rules and legal guidelines.

Comments are not edited by Dunmow Broadcast staff prior to publication but may be automatically filtered.

If you have a complaint about a comment please contact us by clicking on the Report This Comment button next to the comment.

Not a member yet?

Register to create your own unique Dunmow Broadcast account for free.

Signing up is free, quick and easy and offers you the chance to add comments, personalise the site with local information picked just for you, and more.

Sign up now

More news stories

Yesterday, 12:56

Kemi Badenoch, MP for Saffron Walden, says she will be supporting Theresa May in Wednesday night’s vote on her leadership.

Yesterday, 08:34

New figures from Essex County Council (ECC) reveal its spending and contribution to mental health services for children and teenagers has been cut by hundreds of thousands of pounds.

Tue, 14:56

Essex Police have arrested 91 people in the first nine days of their Christmas anti-drink and drug driving campaign.

Tue, 11:53

Content has become one of those buzz wordy sounding things that it is trendy to bash, marketers can be very quick to channel their inner hipster in this way. Content marketing could be cast as crusty and old fashioned in the light of more technical, data driven ‘new age’ marketing techniques, but maybe all it needs is a bit of a polish.

Digital Edition

Image
Read the Dunmow Broadcast e-edition E-edition

Most read stories

Newsletter Sign Up

Dunmow Broadcast weekly newsletter
Sign up to receive our regular email newsletter

Our Privacy Policy