Saving. Lessons why you should or should not.

[Gerry557]

Most people here are probably in the should save camp.

I'm trying to put together reasons why you should save and or arguments against the negative effects of saving. Something for older school kids or new younger workers.

I know my own reasons but just happy to hear maybe something different or left field that I might not have considered.

So why save?

[Itsallaguess]

So why save?

Three of the biggest reasons for me personally -

1. To give your 'future-self' potentially-beneficial 'life-options' that are likely to be unavailable, or at least much more difficult to achieve, if such saving doesn't take place.

2. To help instil the idea that when you're young and just starting out working, the primary source of finance is likely to be 'your own human capital', in that, for the most part, if you want money then 'you' work for it. A potential alternative to that, and one that can often start very small but grow at a surprising rate with a good, long-term financial attitude, is where 'your own financial capital' can carry some of that 'source of finance' burden, and past-savings can eventually be utilised to 'work for itself', to help generate an important alternative source of funds, and one that doesn't necessarily then require your own 'human capital' to generate it...

3. My final reason is, for me, the single most important one, and that's to say that saving money strongly instils a much broader sense of 'worth' when it comes to wider personal finance. For me, it's very similar to exercise, in that because I regularly exercise, and understand the health-benefits of doing so, I don't tend to then go and 'waste' those exercise periods by then eating poorly - the exercise tends to instil broader sensibilities into other areas of my life that then mean that, generally, things tend to 'pull in the same beneficial direction', and don't fight against each other. I very strongly believe that 'saving' is to personal finance, what 'exercise' is to personal health, and that once a long-term personal attitude of regularly saving some level of cash is instilled in people, then there's a tendency for there to be a quite natural 'bleed-over' into other beneficial areas of personal-finance as well, where other broader considerations of 'value' and 'worth' with regards to money are also naturally generated over the long-term too...

Cheers,

Itsallaguess

[DrFfybes]

Why save?

For me, it was to buy things I wanted without taking on debt. I was brought up to believe that you only buy something you can afford, no cash, no purchase, the only acceptable debt was a mortgage.

And not being in debt gives you flexibility.

I only really started to save for retirement outside company pensions in my late 30s, when I'd got the other things I wanted, but I think the best lesson for me as a youngster was to LBYM than to actively save.

It is tricky to pitch - my neice has started teaching her 9 and 10 year olds the value of money. They get £1/month for each year old they are, and she set up a system with 'pots' and they could choose a goal to save towards, were explained to that they needed to build up a reserve for larger items, the summer festivals and Xmas, how they could see how they were reaching their targets for the more expensive items, etc etc. Then she put the money in and left them to it.

They'd spent it all by teatime.

That was at the start of the month, apparently the reality is just starting to sink in when they are told "no, you spent your money, you have to wait until next month". I have quite a few friends who took untlil they were 25-30 to learn this lesson, and another 10 years to get out of debt.

Paul

[Urbandreamer]

I have an issue, saving to me means storing money.

I really haven't saved in decades, though recently I have started saving small amounts of Bitcoin. Instead of saving, what I usually do is invest (ie buy equities).

So, why shouldn't you save? Well I would argue that the value of what you save has a clear history of falling. If you have the room, there is an argument for buying shoes that you don't currently need, in order to replace the ones that you currently use at some future point. Of course this assumes that "we" don't find ways to make and sell shoes cheaper.
Alternatively you could buy part of a company that will provide those shoes for you in the future. The shares won't take up the same room as the shoes. You could buy shares in everything that you use, i.e buy an index tracker.

The phrase "save for your future" is I'm sure not unknown. I'd argue a better idea would be to attempt to buy your future.

Of course, it's still advisable to be able to find funds sufficient to your needs quickly without borrowing. Ie you need a new washing machine / oven etc.

The language is old and folksy, not something that would be popular with young people today, but the ideas in "The richest man in Babalon" are well worth a review.

[scrumpyjack]

and looking at the big picture 'society' needs people to save in order that others can borrow, and to minimise the number of people who have to be bailed out by the state.

even Jesus saves

[TUK020]

this is worth a read
https://monevator.com/the-really-obviou ... ing-money/

[pje16]

even Jesus saves

Sorry can't resist....

and Moses knocks in the rebound

[Gerry557]

this is worth a read
https://monevator.com/the-really-obviou ... ing-money/

Yes I have come across that. I do spend some time on his website.

[Gerry557]

I have an issue, saving to me means storing money.

I really haven't saved in decades, though recently I have started saving small amounts of Bitcoin. Instead of saving, what I usually do is invest (ie buy equities).

So, why shouldn't you save? Well I would argue that the value of what you save has a clear history of falling. If you have the room, there is an argument for buying shoes that you don't currently need, in order to replace the ones that you currently use at some future point. Of course this assumes that "we" don't find ways to make and sell shoes cheaper.
Alternatively you could buy part of a company that will provide those shoes for you in the future. The shares won't take up the same room as the shoes. You could buy shares in everything that you use, i.e buy an index tracker.

The phrase "save for your future" is I'm sure not unknown. I'd argue a better idea would be to attempt to buy your future.

Of course, it's still advisable to be able to find funds sufficient to your needs quickly without borrowing. Ie you need a new washing machine / oven etc.

The language is old and folksy, not something that would be popular with young people today, but the ideas in "The richest man in Babalon" are well worth a review.

I have never come across "The richest man in Babylon", well not in that name. The lessons if different forms I have. Might see if I can get a copy though. As for saving, I meant cash, property, investments. I'm not sure about bit coin, I'm not qualified enough to comment.

[Urbandreamer]

I have never come across "The richest man in Babylon", well not in that name. The lessons if different forms I have. Might see if I can get a copy though. As for saving, I meant cash, property, investments. I'm not sure about bit coin, I'm not qualified enough to comment.

Here is a link to Wiki on the work.
https://en.wikipedia.org/wiki/The_Riche ... in_Babylon

As it should be out of copyright, you can almost certainly find PDF versions on the web.

Re bitcoin, I wasn't recommending it. Simply stating that it was something that had caused me to reconsider "saving" in addition to investing.

Moderator Message:
Spelling of "Babylon" corrected. --MDW1954

[DrFfybes]

I have an issue, saving to me means storing money.

I really haven't saved in decades, though recently I have started saving small amounts of Bitcoin. Instead of saving, what I usually do is invest

I haven't saved in decades either, but I certainly did save BEFORE I invested. Of course back then there were no (that I knew of) monthly drip purchase systems with zero or minimal dealing charges, heck even brokers waiving the 5% fee upfront on funds seemed pretty newfangled. So for me it was HL, with their tenner or so a go fee for buying shares.

And the consequence of that was I was NOT going to lose 10% of the £100 or so per month I had spare in dealing fees, so instead I put the money in HL as cash, and waited until there was £500, then invested.

However,I was still saving. And one of the first things TMF showed me was a need for a cash buffer - 3 months' outgoings. I used to regularly accumulate that, but then the sum usually coincided with something with 'Naim' on appearing in the local small ads, so HL seemed a more "out of sight out of mind" place for my cash to accumulate.

Paul

[Urbandreamer]

....
And the consequence of that was I was NOT going to lose 10% of the £100 or so per month I had spare in dealing fees, so instead I put the money in HL as cash, and waited until there was £500, then invested.

However,I was still saving. And one of the first things TMF showed me was a need for a cash buffer - 3 months' outgoings. ...

Paul

It's a perception thing. I always understood saving as putting money aside to use later. Investing carries with it a degree of speculation or risk. You share the risks, rewards and returns from what you invest in, rather than the interest from the use of the money that you deposit.

I confess that the odd company that I invested in has folded over the years. I simply can't consider the money that I invested in them as "savings".

As for 3 months outgoings, while I currently have more than that as cash. I view the fact as unwise and lazy on my part. I use to keep less than 1 months outgoings as cash, knowing that my portfolio was diverse enough that I could call on it and obtain funds within a week. Hence I could pay on a credit card if needed, yet still cover the costs before the bill came due.

[Wuffle]

I walked into a hifi dealer in 1990 and spent an inappropriate amount of money.
It has given me joy, sometimes for hours a day for 30 years and continues to.
OH is the same with expensive kitchenware. The French stuff, I won't attempt to spell it.
I will happily work a little longer at the end in exchange.

My dark suit has been out a lot lately.
This will end.

W.

[tjh290633]

After buying my first car on HP, I started saving for the next one. It meant that I could pay cash and avoid the costs of HP. Only £10/month in 1960, but about 15% of take-home pay.

Nowadays it helps pay for holidays, but I do save a bit more.

TJH

[Gerry557]

I have never come across "The richest man in Babalon", well not in that name. The lessons if different forms I have. Might see if I can get a copy though. As for saving, I meant cash, property, investments. I'm not sure about bit coin, I'm not qualified enough to comment.

Here is a link to Wiki on the work. (sorry for my miss-spelling)
https://en.wikipedia.org/wiki/The_Riche ... in_Babylon

As it should be out of copyright, you can almost certainly find PDF versions on the web.

Re bitcoin, I wasn't recommending it. Simply stating that it was something that had caused me to reconsider "saving" in addition to investing.

Yes I read the wiki when I googled it. I didn't realise the advice went back so far.

[Gerry557]

I remember chatting to a girl who worked at Macdonalds. She looked a things she wanted to buy as 4.5 shifts or 7 shifts etc.

The amount of effort needed to aquire whatever it was sometimes made the thing more appreciated or deemed not needed.

I quite liked this modern example. It's definitely resonated with me.

[NotSure]

After buying my first car on HP, I started saving for the next one. It meant that I could pay cash and avoid the costs of HP. Only £10/month in 1960, but about 15% of take-home pay.

AIUI, one of the main points of a low IR policy is to discourage saving - why save cash when it falls in real terms when you can borrow for next to nothing and stimulate the economy now, rather than later?

[tjh290633]

After buying my first car on HP, I started saving for the next one. It meant that I could pay cash and avoid the costs of HP. Only £10/month in 1960, but about 15% of take-home pay.

AIUI, one of the main points of a low IR policy is to discourage saving - why save cash when it falls in real terms when you can borrow for next to nothing and stimulate the economy now, rather than later?

You have not always been able to borrow for next to nothing, and interest rates have been unnaturally low for over a decade. My first car had a list price of about £750, and it cost about £850 buying on HP over two years. Abolition of car tax reduced the price of the next one to about £650, and a decent part exchange deal meant that I could buy No.2 for cash.

What a low interest rate policy does is penalise many who rely on interest on their savings, or who want to buy annuities with their retirement fund. It also penalises employers, who have to boost occupational pension funds because of stupidly low interest rates. We should be matching the Fed for interest rates, not navel contemplating and taking minimal action.

TJH

[NotSure]

After buying my first car on HP, I started saving for the next one. It meant that I could pay cash and avoid the costs of HP. Only £10/month in 1960, but about 15% of take-home pay.

AIUI, one of the main points of a low IR policy is to discourage saving - why save cash when it falls in real terms when you can borrow for next to nothing and stimulate the economy now, rather than later?

You have not always been able to borrow for next to nothing, and interest rates have been unnaturally low for over a decade. My first car had a list price of about £750, and it cost about £850 buying on HP over two years. Abolition of car tax reduced the price of the next one to about £650, and a decent part exchange deal meant that I could buy No.2 for cash.

What a low interest rate policy does is penalise many who rely on interest on their savings, or who want to buy annuities with their retirement fund. It also penalises employers, who have to boost occupational pension funds because of stupidly low interest rates. We should be matching the Fed for interest rates, not navel contemplating and taking minimal action.

TJH

I never said I thought overly low IRs were a good thing (I don't) just that particularly in recent years, they have been set as to dis-incentivise saving and encourage spending/borrowing. That may be changing now.

[scotia]

What a low interest rate policy does is penalise many who rely on interest on their savings, or who want to buy annuities with their retirement fund. It also penalises employers, who have to boost occupational pension funds because of stupidly low interest rates. We should be matching the Fed for interest rates, not navel contemplating and taking minimal action.

And make new indexed linked savings certificates available to all.
Then perhaps savings would be savings - rather than substantial losings as at present. I can't remember when there was such a difference between inflation and interest rates.