Who Stole Our Savings Habit?

I believe this is exactly the case, sixhundred. My wife and I are in our early 30s and earn no more than the national average - we have already paid off the mortgage on our semi and are now on the way to building a decent nest egg. We save/invest about 25% of our joint income. How? By not buying new luxury cars, going on expensive holidays or getting up to our ears in debt buying the latest designer clothers or pointless electronic gizmos. I get the impression that our instincts put us in a tiny minority, especially among our generation. People have laughed at our thrift over the last few years as encouraged by the government and the media they've embarked on a debt-fuelled spendathon. They're not laughing so loud now they've realised that good times are behind us for a while. Whether to save or spend is a choice, and always has been.

Yes, there are a few people who genuinely have to live hand-to-mouth, but they aren't responsible for the declining savings ratio. I suspect it's mostly a result of the middle classes sailing increasingly close to the wind to keep up appearances. In many cases it's the higher earners who have managed to leave themselves the least room for maneouvre.

Not that the government does much to genuinely reward savers. My hard-won savings deny me access to means-tested benefits and are at risk of being eroded by inflation thanks to Gordo and Al. I sometimes wonder whether I'd be better off doing what everyone else does and blowing it all on a new 5-Series.

Savaholic, you are absolutely correct. My wife and I are in our late thirties, we realised about six years ago that the "good times" could not go on for ever, so aggressively paid off the mortgage and saved in many other ways too.
Whilst I live in the same type of house as most of my neighbours, and earn more than all of them, mines the 8 year old ford focus on the drive, and every week, they all ask when I'm getting rid of my cr*p car. I just laugh now, and say I'll get rid of the car when they get rid of their mortgage!
When times are bad, save, when times are good, saver harder!

The "must have now, live for today" outlook of most Brits is the real reason for the drop in savings

C Rapspray

I agree with worriedone above. I am almost glad that I no longer have children around because I'm sure that I wouldn't be able to keep up with all their needs and wants.

To explain, I was taught to save way way back, my first day at school in fact, September 1940. The village school acted as a sub-branch of a bank and the children all took a small amount every Monday morning to add to our savings accounts. No one thought of owning their own home or having a car, so there was less to spend money on - the family's money went on essentials first like rent, warmth and food.

My school savings were in fact the basis for a first mortgage in 1962. A lot of ups and downs followed over many years, but now in my 70s I find I've rediscovered the 'savings habit' I had as a child and we both save now just because we don't know what our needs may be in time to come. Just what they said at home all those years ago - the 'rainy day' may come!

Now, with children, it seems to me that it's the easiest thing in the world to fritter money away on their daily 'wants', not just the shoes/clothes that worriedone mentions. For example, I had school dinners and then nothing to eat until I got home for tea, after a 2-mile walk (a 2-mile run when I was being bullied). I had 4 ounces of sweets a WEEK. Now, I see children needing sweets, crisps, chips, sweet drinks when they come out of school and on their way home, whether they're with parents or not. 'They have to have it' I've been told. But this is a daily/weekly cost which is never taken into account.

Living frugally was easier for my generation because few of us had, or expected to have, any of the consumer goods that people now expect as a right. Television didn't arrive in our part of England until the early 1950s. No one had a car except farmers or professional people. No one had a telephone, similar. No one owned their own home. If you take all these things out of the equation, the comparison with past decades begins to look quite different.

In addition, there was a different mindset. The working classes had their own pride. They paid their own way and abhorred debt - that was one of the big reasons for saving, the 'rainy day' ethos. There were few if any state benefits, so if someone, whether adult or child, died suddenly, the funeral had to be paid for by the family.

We had fewer clothes. We all had a 'special' outfit for Sundays, a hat and coat for church, but we didn't have clothes for a night out clubbing and drinking. There was much less drinking, full stop! Where I grew up few people smoked. The younger women learned to smoke in the Forces, the older women didn't smoke.

So you can perhaps see that there were a lot fewer calls on your money decades ago, even though people earned less.

Some younger people have still got the savings habit, so it's too much of a generalisation to say that none of them have.

I think that sarlea above has raised another important point. It could be argued that the Welfare State has acted as a big disincentive to save. Sarlea's comment: 'Makes me wonder why I bothered to save at all. If I had less or no savings, at least I'd get help from the government' is also one that we hear in relation to older people.

It goes something like this: 'My neighbour never saved, now gets full state pension plus pension credit, all housing costs paid i.e. housing benefit/council tax benefit, and lives well. I have a small works pension or savings plus own my own home - income is too high for pension credit so I am worse off. If I hadn't saved, had spent it all (fill in the gaps!) the government would help me, as it is they don't'.

People who know I am still saving often asking 'why?' I have tried to explain many times but either you understand it or you don't.

Sarlea, I wish you well. The same thing happened to my son-in-law - following the downturn in the airline industry after 9/11 (he worked for a company that supplied parts) All his savings went, but he did get another job. Don't give up hope.

2 years ago my eldest granddaughter was not only jobless but homeless as well. She was given a council flat, then she got her 'dream job' after a year doing a job that she didn't much like. Once she had her repairs and renovations done, the next thing she did was to open a regular savings account. I'm proud of her. She is not about to put any of it in jeopardy because she knows what the alternatives are.

McLeodC - you say that the government should ignore savings for the first six months of any period of unemployment. My understanding is that there are two types of Job Seekers allowance - contribution-based and income based. The latter is affected by the level of savings a person has, the former isn't. Providing a persion has made enough NI contributions in the past then they should be entitled to contributions-based Jobseekers allowance for the first six months that they are unemployed, and therefore their savings are not taken into account for that period.