“You can’t take it with you.”

“You could get hit by a bus tomorrow.”

“I’d rather spend it and make memories.”

You might think it would be easy to convince people to save money. Shit happens, after all – it’s a question of when, not if. But it’s actually very difficult. Just take a look at this chart from the Office of National Statistics:

The chart shows UK households’ saving ratio as a percentage of their income since the start of the year 2000. As a nation, most of the time we’re saving less than 10% of our income and at times it’s been below 5%.

During the COVID-19 pandemic, this leapt up to nearly 25%. This was a combination of not being able to spend money on things that we normally would, like holidays, restaurants, live music and the pub, and people putting aside money in a time of great uncertainty.

So, we do know that putting aside money is a sensible thing to do, so why is it so hard to get people to do it?

I Just Can’t Get Enough

Many people just don’t have any money left over at the end of the month after paying their bills. It’s that simple. At the time of writing in May 2022, the cost of living is skyrocketing with inflation at over 9% and salaries not keeping up.

We Live for Today

As humans, we tend to focus on the here and now. What am I going to do today? What am I going to eat tonight? What will I watch on Netflix afterwards? I’ve just been paid, what can I buy?

For most of us, it’s not in our nature to think about the long term. We live for today.

We would rather get a smaller reward now than a larger reward later. This is known as present bias. We’re impatient. We want immediate gratification. It’s much more fun to buy new clothes or a new phone today than it is to save that money for something months, years, or even decades down the line, like our retirement.

It’s Easier Than Ever to Spend

We used to pay for things with cash. Then plastic came along, and we started using cards. These days we can just need to tap our cards against a reader for a couple of seconds and we’ve bought something. Tap. Beep. It doesn’t even feel like we’re spending money.

We don’t even need our cards anymore. We can use our phones or even our watches. Tap. Beep. Bought.

We can sit on our settee or lie in bed and use our phones, our tablets, or our laptops to buy just about anything we want in a few seconds. One click delivery on Amazon; we don’t even have to fill in our details.

There’s So Much to Spend It On

Houses. Cars. Holidays. Clothes. Gadgets. Subscriptions to endless TV and music services. Eating out.

Temptation and opportunities to spend are everywhere. We’re bombarded by adverts every day by marketers who want our money and who claim that buying their product or service will make us happy.

Everyone Else Is Spending

When you talk to people, they don’t tell you about putting money away for the future. They tell you about the new things they’ve bought. You see the new clothes they’re wearing.

On social people, people show off their new cars or their holiday photos.

You’re exposed to this and it can be very difficult not to think, “If everyone else is doing it, why should I miss out on all the fun?”

Why Should You Be Different?

If everyone else is blowing all their money having a great time, why shouldn’t you?

The Knowns

There are things you don’t have that you want. It could be:

• A house
• A car
• A newer car
• A wedding
• A holiday
• Enough money so that when you’re old you can have food AND heat your house (the luxury!)

Except for retirement, you’ve probably got a good idea of how much these things cost. You save over a period of time until you hit your target then you spend the money and buy whatever it is you want. Job done.

There are things you know could go wrong that you (should) put money aside for. The things that you can see coming.

• Your house (the boiler blows up, tiles get blown off the roof, the washing machine breaks down)
• Your car (tyres, brake discs and pads, any number of components dying)
• Dental issues
• Health issues
• Losing a job
• Etc

A storm once annihilated the fence in my back garden (nearly £1000 to replace).

This year I had to replace the number plate lightbulbs in my car. Last year, I had to replace the spark plugs. The year before, I had to replace a sensor (nearly £300).

As I write this, I’m in the process of getting a dental implant to replace a crown that broke and took most of what was left of the tooth with it (at least £2500).

On a long enough timeline, you should expect anything that can break, will.

The Unknowns

Sometimes things that we couldn’t have anticipated happen. The obvious example here is COVID-19.

If you set aside money only for the predictable things, what happens when something hits you out of the blue and you don’t have the money to cover it? Stick it on the credit card?

We live in an unpredictable world. We like to think we have control over our lives, but the reality is that something unexpected could come along at any moment. Having money saved gives you a safety net against that unpredictability. If something unexpected and unforeseen happens, at least it won’t be a financial emergency. It reduces stress and anxiety, and you can sleep better at night.

You Want to Get Rich? It’s Not Your Income That Matters – It’s How Much You Save

No matter how much you earn, if you spend it all then you’ll never build wealth. You’ll always be broke. It doesn’t matter if you earn £20,000 a year, £100,000 a year or £100m a year.

But if your savings rate is 50% (of whatever that income is) then you can retire in 17 years, starting from £0.

It’s Within Your Control

If you consistently live within your means, save and invest, then eventually you’ll be wealthy.

You can’t control stock market returns but you can control the choices you make. One of those choices is to save money or not.

It’s Repeatable and It’s Predictable

Will crypto go “to the moon”? I don’t know.

Will the long bull run the stock market has experienced over the last 10 years continue for much longer? I don’t know.

Index funds have performed brilliantly over the decades and outperformed virtually all professionals. Will that continue? I don’t know.

If I read up on a load of successful entrepreneurs and then start my own business, will I be able to repeat their success? Statistically, probably not.

Will living below your means, consistently saving and investing money, and being frugal continue to build wealth? Now that one I do know: yes.

It Gives You Options

Would you like to quit the job you hate? You’ll need money to do that.

Would you like to retrain to do another job? You’ll need money to do that.

Would you like to be a stay-at-home parent instead of going back to work? You’ll need money to do that.

Would you like to take a lower paid job that’s more meaningful than your current one? You’ll…you see where I’m going with this.

You Sleep Better at Night

If you’re living on the financial precipice, where any unexpected event will send you over the edge, you’re in a constant state of worry. When you’ve got that safety net, you know can handle what life throws at you.

Eventually, You Can Buy Your Freedom

If you consistently live below your means and invest well, one day you won’t have to work again if you don’t want to. The more the save, the sooner that day will come. You’ll be able to spend your time doing what you want, when you want.

Freedom is my big reason. I don’t want to stuck at a desk for the next 25 years. I want to be able to do what I want, go where I want, when I want. That makes it very easy for me not to buy stuff I don’t need. There’s nothing I can buy that’s more important to me than my freedom. That doesn’t mean I’m living like a hermit or depriving myself along the way. Not at all. But having that big target to aim for, that reason why, makes it easy to say no to the low value things that would prevent me reaching that goal.

Your Turn

What are your reasons for saving money?