26 September 2023

Spending time: Why is saving up so hard to do?

Start the conversation

Jenn Selby* says our financial habits and how we feel about money seem to be at odds with each other.

With the whole world seemingly in crisis, young people could be forgiven for exercising a ‘do or die’ attitude to most things in life, including their personal finances.

What’s the point in saving for a home when everything seems apocalyptic?

Why tuck a little away for a rainy day when it feels like it’s already pouring?

A recent study by Nesta, a foundation that promotes innovation in industry, found that half of 18 to 34-year-olds say they regularly run out of money.

Annual research by F&C Investment Trust looks into the spending habits of millennials more generally.

This year, it found that 68 per cent of millennials want to turn over a new financial leaf and start saving, while 66 per cent said they were so worried about money and being in debt – that it keeps them awake at night.

Our financial habits and how we feel about money seem to be at odds with each other.

With stagnating wages, a rising cost of living and, of course, a housing crisis, many of us don’t have much excess to play with anyway.

But even those who have had a significant pay rise manage to expand their spending so that, rather than saving, they remain stuck living from pay cheque to pay cheque.

This constant ‘living in the moment’ is one of the key reasons so many of us find it hard to make it to the end of the month with money to spare.

“We all have something that is called the ‘present bias’ – it feels much better to make me happy today than me in the future happy,” says Dr Peter Brooks, the head of behavioural finance at Barclays.

He studies the psychology of our spending habits and helps the bank better equip us with tools to do things like save.

“We find it difficult to look into ourselves in the future, so we forgo those things that make us happy in that moment,” Dr Brooks says.

Catherine Morgan is the founder of The Money Panel. She coaches women in managing their finances.

She says our emotional connection with the way we handle money starts from the age of seven.

“How we feel about money is driven by external factors like media, family, peers but also from our internal influencers – our personality and our beliefs and experiences,” she says.

“These messages and experiences have a huge impact on how we feel about money.”

“They sit in our subconscious mind and shape our internal belief system, which then drives how we behave with money.”

“This then becomes the money story we believe to be true.”

“We anchor every thought about money on our belief systems even if they are not true.”

“This creates money blocks and this is what stops us from making any progress.”

Dr Eliza Filby, a generations expert and historian, adds another factor that influences millennial spending habits.

While our parents, the baby boomers, were encouraged to invest in houses – which were then much cheaper – and save, we are actively encouraged to behave more recklessly.

“We must stop trying to fit millennials into the baby boomer straitjacket,” she said in response to the F&C Investment Trust review.

“Millennials will have very different lives and the previously available incentives – great savings rates and pension schemes – do not exist for them today.”

“In fact, they’ve been actively dissuaded from saving or acquiring assets.”

“Millennials still want to buy a home but see it as exactly that – a home not an investment – as baby boomers may see it.”

“Millennials still worry about their financial future, as these findings attest, but they have a very different set of priorities – both short and long term – than their boomer parents.”

“They would rather spend their money travelling when they are young than saving up for the dream cruise in their seventies.”

“Given they expect to work much longer, they see their pension not as funding their post-sixties lifestyle but as a social care plan for their final years.”

What we do have on our side, however, is technology.

If we learn to use things like banking and saving apps properly, we may slowly be able to unpick our less helpful spending habits and start saving more regularly.

Dr Brooks encourages us to override our “fear of finding out” what we spend on, and use saving apps to monitor the areas where we do overspend.

“People have a fairly good idea of what they spend on rent, travel, season tickets, but much less on other items,” he says.

Knowing that we find it hard not to spend money in our account, he also recommends setting up a standing order to come out the day you get paid and go into an account that is harder to access.

Morgan says the key to getting on top of our finances is to focus on our impulse control.

“Next time you go to reach for your credit card to make a purchase, just pause,” she says.

“Ask yourself: what emotion are you feeling in that moment?”

“If you are stressed, or feeling sad, or guilty, ask yourself: what could you do differently?”

“Implement a 24-hour rule for yourself next time to allow your brain to think more rationally, when the emotion has gone.”

She also encourages people to take a good, hard look at their expenses.

“Rate on a scale of one to 10 how valuable they are to your wellbeing,” Morgan says.

“Remove the ones that don’t bring you happiness, focus on ways to save money on the ones that you have to pay, like utility bills, and plan ahead for unexpected costs over the next 12 months.”

“Setting aside money into pots or different accounts for different expenses can help, too.”

“Perhaps have a treat pot, a Christmas gift pot, a car expenses pot, and skim money into each pot each month.”

“Automate this if you are a spender.”

* Jenn Selby is a freelance journalist, editor and women’s rights campaigner. She tweets at @JennSelby.

This article first appeared at www.refinery29.com

Start the conversation

Be among the first to get all the Public Sector and Defence news and views that matter.

Subscribe now and receive the latest news, delivered free to your inbox.

By submitting your email address you are agreeing to Region Group's terms and conditions and privacy policy.