Saving Money is Hard
Why is saving money so much harder than spending money? Spending money comes so easy… some might actually say that spending money gives them huge amounts of (temporary) pleasure! Why do we not get the same level of enjoyment out of paying £100 into a savings account that we do blowing it on a night out or on a fancy meal? Why does spending £1000 on a holiday feel so good, yet putting £1000 away for a rainy day feels like you have suffered a loss? There is no doubt about it… Saving is hard.
The answer is simple really.We are the generation that thrive on immediate gratification.We want things now and we don’t care how. We would rather blow £10 on some junk food than make an extra payment on our credit card. After all.. £10 is too small a sum of money to make a difference.. right?
Some call it the snowflake effect, I call it getting a grip of your life and understanding why it is important to save. For those of your who are new to the concept of compound interest or the power of savings, consider the following situation.
According to recent research, the average family in the UK spends £1230 each year on dining out / takeaways – which equates to approximately £100 a month. Not only is this extremely unhealthy, but it is utterly ridiculous!
Consider a situation where a family halves the amount spend eating out and instead saves the money – £50 per month – for their child’s future education at an annual interest rate of 5%. Assume that they start to save this money each month from the moment their new baby is born until they are ready to leave home at 18 and they would have a whopping balance of £17,460!
In reality, £50 per month is a pretty insignificant amount of money, where as the result is unarguably VERY significant!
Which Type of Saver Are You?
The Disciplined Saver –
You are pretty disciplined when it comes to saving and regularly build on your nest egg! You have probably been at it for some time and can already see some interest and other results of your dedication. Transfer the bulk of your savings money into your savings account on Pay Day and re-evaluate your situation throughout the month. Consider shifting an extra few pounds here and there when you skip a latte or other treat. You can always do better.
The Occasional Saver –
You like to save sometimes. You understand that you probably should, but don’t think skipping a month here and there makes too much of a different? (OOOPS!) You consider yourself to be in control of your finances, but admit you could probably do a little better and are often over-cautious about leaving enough money in your current account to see you through to the end of the month out. Automate your payment to your savings account on Pay Day. This way you will never miss a month. Consider increasing your savings goal by £10-£20 a month and track your progress. Keep going as long as you possibly can!
I think if we are honest, a LOT of us fit into this category!
The Horrendous Saver –
You are a total disaster when it comes to savings. Your credit card would suffice in an emergency right? (WRONG!!). You would much rather buy a few new DVDs each week than wait and save for retirement. After all you only live once right? Why miss out on today in case tomorrow never comes?
The horrendous saver needs to take immediate action. Automate a monthly payment to your savings account (open one if you need to) and delete the savings account from your online portal view. Re-evaluate what you might like to do later on in life… Start a family? Buy a dream house or Retire early? Search for the motivation, because somewhere it exists! Depending on how bad you are with money, you might want to even try and forget about your savings account and consider the monthly transfer a ‘bill payment’
The time to start saving is not tomorrow, the time to start saving is right now. Small savings make a big difference. Small sacrifices today mean a big reward for the future. To celebrate the series of educating others on the power of saving, I am delighted to announce a GIVEAWAY!! Full details below
So Honestly – What type of Saver are you? What % of your monthly income is your target… and what is your actual?