The latest Old Mutual Savings Monitor confirms that while South Africans seem to be waking up to the fact that debt should be avoided, we still are not saving enough. The majority of people are not saving for their children’s education, and 40% of respondents say they have no form of formal retirement savings at all.
There are many factors that drive these poor savings habits, but I believe that the underlying reason is that too many people see saving as something negative, something that reduces the amount of money they have to spend on fun things now, and thus something to put off. However, approached in the right spirit, experience proves that saving can be rewarding both in the short- and long term.
It’s easy to understand the long-term aspect. Clearly, if you have made proper provision for your retirement, you will have a much happier time when you are old – you may even find that the ‘golden years’ are a reality, not a cliché.
But most people struggle with the short-term aspect. Putting money aside means less is available now, surely?
That is true, but it is also true that a lot of the unplanned spending we tend to do is often accompanied by feeling of guilt, and the need for self-justification. In practice, it’s much more pleasurable to be able to spend without a care in the world – and that’s the reward of knowing that your spending now is not going to affect your future.
At a practical level, I always advise clients to make themselves the first line item in the budget. Here they should list the money they intend to spend on themselves, but also the money they are putting aside for their futures. That helps to put saving into the right perspective: saving is spending on you – in the future, to be sure, but it is for your benefit, rather than someone else’s. Approaching a budget in this way helps one to see that saving is something one is doing for oneself.
Of course, this attitude is contrary to the prevailing emphasis on instant gratification, but the truth of it is that if we cannot learn to delay gratification, our happiness will be short-lived.
Savings can also be used as a way to help one’s children build up a much more sane and sustainable attitude towards money. Say, for example, your family decides to spend two weeks touring Europe. The more usual approach would be to finance it through credit, meaning that spending all those euros will hardly be carefree; each time you pay R70 for a cup of coffee, you will be unable to avoid thinking that it still has to be paid for, plus interest.
Instead, if one made it a family project to save for the trip over three years, it would teach your kids a great lesson and would mean that when you do go on the holiday, you would be in a position to spend and spend with a light heart.
The same thing applies to all spending. It is just more pleasurable if you know that it is not compromising your future.
In short, we need to learn to see saving as something we are doing for ourselves, not some sort of grudge ‘purchase’. At the same time, having a solid savings plan changes the dynamic of enjoyment in the present, because what you spend now will be pure pleasure, with nothing to pay in the future.