Live now save later?

In the first quarter of 2015, UK households saved an average of just 4.9% of their post-tax income the Money Charity has revealed. This is the lowest average rate of saving since the third quarter of 2008.

The economy and financial health of the country was in a much more precarious state then than it is now, so it might seem somewhat surprising to see the amount we are saving at such a low level with the economy and our income security on a more stable footing. Is this a sign of a growing mentality amongst UK consumers for “living in the moment” rather than thinking of tomorrow?

The cost of living has risen over the years, but there are also now so many things to spend our hard earned money on, and saving can take second best to these. Whether it be having the latest mobiles and gadgets, keeping up with the latest fashion, eating out with friends, or going on the dream holiday, things that to previous generations were luxuries for the lucky few, are now a must have to a more materialistic and consumer led generation. “You can’t take it with you” is an oft used phrase that many go by. Living in the moment is how many people now choose to live.

Whilst it is never sensible to live beyond your means, spending for the sake of spending, with interest rates as low as they currently are, there is also very little attraction for many to save. Money just sat in the bank is earning very little towards a future nest egg. At the same time, the cost of borrowing money is at an all-time low, so many see now as the perfect time to take out a loan for those big purchases, such as a new car or for home improvements.

Whether they are secured or unsecured loans, the relatively low rates of interest make repayments relatively cheap, and this provides consumers with an opportunity to spend now on those necessary things rather than save for the sake of it. As and when interest rates rise, UK consumer mentality may change to one of saving rather than spending.

As with most things, there is of course a balance to strike. Frivolous spending on throw-away items is of course always a reckless way to manage your financial affairs in any financial climate, but well thought through financial planning could mean that spending now is not necessarily bad news for the future saver.

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