Your saving motives vs. saving habits

19
July
2018



Your saving motives vs. saving habits



Before we dive in, take a moment to consider which of the following best describes you and your household in terms of your current saving habits…


• Save regularly by putting money aside each month.

• Spend regular income and save other income (such as investment income, bonuses etc.).

• Save the income of one family member and spend the other.

• Save whatever is left over at the end of the month (no regular plan).

• Do not save.



Saving motives and saving habits

When it comes to people’s saving habits, there are often three distinct types: the regular savers, the irregular savers and those that don’t save at all (the non-savers). From what we’ve found, there’s often a relationship between your saving motives and saving habits*.


Saving motives are not just restricted to saving for a house or a car. Motives can include things like saving for retirement, for children’s needs, for emergencies or just to have funds put away for a rainy day.


Here are some interesting findings regarding the relationship between saving motives and saving habits:


• Someone that has a motive around saving for emergencies and/or retirement is more likely to be a saver, whether regular or irregular.

• Someone with a high income and/or medium to long-term saving horizon is more likely to be a saver, whether regular or irregular.

• Someone with a low-risk tolerance, in regards to investments, is more likely to be a non-saver.


Also, if we look at people that save regularly versus irregularly, regular savers usually have a more positive relationship with a retirement saving motive, a high income and/or a long-term plan for savings goals and objectives.


With the above in mind, it’s important to remember that the source of your wealth creation is you. Of course, none of this is black and white and there are different circumstances in every situation. For some of us, saving may be second nature or come easy due to circumstance, whilst for others, it may be more of a struggle. What is important is to enjoy life now whilst also taking the time to make sure this enjoyment flows through and is experienced by your future-self as well.


By having a clear picture of why you need (or want) to save, as well as the motivation and roadmap to achieve it, you might just find this makes all the difference.



The current climate affecting savers

Admittedly, the recent economic environment, namely slow wage growth and the rise in the cost of living, may be disrupting the efforts of savers through the need to divert more of their disposable income away from saving to spending.


Unfortunately, the impact of this may be evident in the survey results from ASIC’s Australian Financial Attitudes and Behaviour Tracker. For example, of the Australians surveyed:


• 23% saved money using a savings account that was automatically linked to their pay – down 1% from the previous survey.

• 31% saved money using a savings account that was not automatically linked to their pay – down 7% from the previous survey.

• 16% saved money but not through a savings account, for example, put money in an envelope or money box – up 3% from the previous survey.

• 12% saved money by making voluntary contributions to their superannuation account – down 1% from the previous survey.

• 20% saved money by paying more than the minimum amount off their mortgage or other personal loan – down 2% from the previous survey.

• 23% saved money without having a savings plan, namely by earning more money than they spent – down 1% from the previous survey.

• 21% didn’t save any money over the last six months – up 2% from the previous survey.



So, what does it all mean?

When it comes to saving, it’s important to understand the positive effects associated with saving a portion of your income from employment each payment cycle. For example, saving can help with:


• Your capacity to establish an emergency buffer for with the unexpected happens.

• Your capacity to work towards your financial goals and objectives, whether they be saving for retirement, paying debt or buying a home.

• Your capacity to utilise and rely on your cash/debit cards, and to not fall back on credit cards to meet lifestyle expenses.


As always, it’s important to take stock of your existing financial situation, goals and objectives. This may involve, a closer look at your household expenditure to see whether there are areas were surplus income could still be realised, as well as the continuation of tracking your spending and comparing the results to your budget planner. If you’re needing a hand with this, you can contact us for a copy of our Cash Flow planner which will show you exactly where your money is going each month.

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