In the UK 1 in 6 adults have no savings at all.

More than 40% of Americans cannot cover a $1,000 emergency expense.

A lot of people seem to be sleepwalking into financial jeopardy.

What’s the reason for this?

How much do we have on average?

In the UK, men have £23,912 in savings on average, compared to £14,464 for women.

Averages:

• Age 18–24: £2,699 average
• Age 25–34: £11,023 average
• Age 35–44: £13,379 average
• Age 45–54: £12,452 average
• Age 55+: £33,420 average

Interestingly we actually have less on average in the 45-54 bracket than we did the decade before.

Likely factors for this would include children and housing expenses (often due to needing an extra room for the not so little one).

So why aren’t we saving like we should be?

Financial Education

If you’ve followed my Substack you will know that my thoughts of our financial education are very low.

If you are not taught the importance of financial planning as a child, how can we expect people to suddenly start saving as adults?

With a lack of understanding of interest rates it’s also easy to see how the issue below has risen so much…

The rise of buy-now, pay-later

An increase in consumerism and ease of purchasing items through these schemes has coincided with more adults being in debt.

It’s never been easier to browse goods from the comfort of your sofa, and with these schemes, it’s never been so easy to buy them.

Finance used to be for expensive and rare purchases like your car or house. Now you can get it for your toaster…

And by definition if you are in debt, you are unlikely to have substantial savings.

Confusion over products

Now this one is a personal hunch of mine, but I think that a lot of people are confused by the different types of accounts, especially ISA’s - apparently having a Youtube algorithm that regularly throws up videos on this topic is fairly unique to sad people like me!

If there is too much choice and confusion, people are likely to just stick to what they know. The savings account that is linked to their current account. It’s not an ISA and has a terrible savings rate. Putting money into it has a real-term loss each year once inflation is accounted for.

Saving this way is like starting 10 steps back.

Deposit Nihilism

“I won’t ever get there, so what’s the point?”

Deposit Nihilism describes the thinking that the required housing deposit is so high there isn’t any point saving at all. People therefore don’t start saving at all as there is no realistic chance of meeting their goal.

Yes you’ve heard about budgeting and cutting out the coffees, you’ve heard about the magic of compound interest, but the best you can do is £150 a month and at that rate it will take you 20 years to get where you want to be.

I honestly don’t blame people who develop this outlook. Saving can be depressing, especially at the start.

All I would say is you never know what you might actually use the savings for. What starts as a fund for a house deposit, could be the payment for that unexpected legal bill that comes out of nowhere.

The Nursery & Care Squeeze

Care doesn’t stop with your children, parents need looking after as well.

This can squeeze people, sometimes at both ends. With costs rising all round, both nursery and care costs are becoming ridiculously high.

Lifestyle Creep

I won’t bang on about this one too much, as if you have followed me for a while you will know my thoughts on this.

What I will say is that people are no longer just trying to keep up with their neighbours like they did in the old days. There is now also everything you see online - often this is people showing their very best selves presented as their everyday life.

The need to spend to keep up with others is real and must be resisted.

Why do we need to save?

Sounds like a stupid question doesn’t it? However, it’s very rarely asked, or explained.

And it’s a fair question, with the amount you pay in tax and national insurance over a lifetime, why should we save?

Retirement

The UK state pension age is soon going to be raised to 68. Many people who are 50 or under are sceptical as to what state pension they will get….if any.

It’s becoming increasingly obvious that if you want to have any sort of retirement that goes beyond the very basics, you shouldn’t be relying on the state pension – you need to be putting something aside yourself.

Your company has to offer you a pension in the UK - make sure you are enrolled and maxing their contributions - this is free money.

Emergencies

You never know what’s round the corner.

Life has a funny way of giving you that shit luck just when you really didn’t want it.

Having a fund of 3-6 months wages provides you a cushion against this, and, crucially, prevents you from going into debt.

Passing forward to children

If you have been anywhere near the news in the last few years you will have heard something to the effect of “Everything costs more, we don’t have enough houses and our children won’t be as rich as us.”

If you have children, anything you can leave them will help them in an increasingly bleak looking world.

Enjoying yourself

Don’t forget to spend your money on things you want to do. That trip to Japan you’ve always wanted to go on, the new kitchen you’ve always wanted, the classic car you always had the poster of.

Life shouldn’t be an endless procession of going from paycheque to bills. Save a bit and then treat yourself, you deserve it (I hope).

Adam’s top tips:

• If you have one, check how much your private pension scheme is projected to bring you in retirement.

• Shop around for the best interest rates for any cash savings you have, compound interest is the 8th wonder of the world after all!

• To nicely contradict the tip above…..Don’t have all your savings in cash, inflation will eat away at it. After you have an emergency fund, and cash for near-term goals, look to diversify into other investments (I’m looking at you global index fund).

• Automate any savings you can just after pay day, then you don’t have to persuade yourself to save each month.