“I really regret saving all that money", said no-one, ever.
Most people understand that the key to feeling good about money is to spend less than you earn. In that way, you build up a nice little savings pot to give you financial flexibility. The trouble is, there's the kids’ uniform, the broken boiler or that fantastic new Bluetooth speaker. Whether out of pleasure or necessity, spending usually wins over saving.
You're not alone. UK households are now overall net borrowers rather than savers, with savings levels at their lowest since 1963 (1). The problem has many drivers. Housing is more expensive, leaving many people believing they can’t afford to save. We spend longer in the digital environment, where all-knowing advertisers can seduce us into impulse buys. Either way, more people are relying on debt for their day-to-day living expenses.
While these impulse buys create a little short-term buzz, it's often quickly forgotten. The regret, on the other hand, can linger. Yet, you're unlikely to feel the same regret had you put that money into a savings account, where it would now be gently compounding away, building a financial cushion for the future.
However, it’s not psychologically easy. There are a number of tricks to resist an impulse buy: you could work out how long it would take you to earn that money in hours worked. Or you can add the cost of credit card interest to the total (imagine paying 30% extra for everything you buy). Or you could force yourself to match your impulse spending with a contribution to your ISA.
While we would never pretend that we could make saving exciting, it can be motivating to visualise what life would be like if you had a healthy pot of cash to fall back on. Savings allow you to have choices about your future; where you go on holiday, the type of job you have, where you live and when you retire. Even if you would change nothing about your life, having choices can enhance your emotional well-being. Living from pay cheque to pay cheque takes a toll and is a major cause of stress.
A recent survey from Barclays showed that two-thirds (60 per cent) of baby boomers admitted that they did not save enough earlier in life and are now struggling to make ends meet. They regret not saving earlier. It's worth thinking twice about that Bluetooth speaker, no matter how lovely it would look on your shelf. Your future self will thank you (2).