Are you too poor to save any money each month?
According to a new report from The Post Office, the soaring cost of living is causing people to return to “pre-recession spending habits”.
With little incentive for savers due to low interest rates and high price inflation combined with low or flat wage inflation, it is little surprise that savings are suffering.
This year people are set to be able to save £150 less than in 2013. The outlook for the future doesn’t look particularly good either.
According to the report, the amount people can afford to save each year will fall by an average of £830 a year by 2018.
The Future Of Savings study shows the amount of “savable” cash – a term used to describe the amount of money left after all household expenditure – is due to fall from £3,780 to £2,944 a year by 2018.
This will result in a situation where far too many have inadequate savings pots, putting more financial stress on people in later life.
Interest rates are likely to remain low for the near future, although recent comments by Charlie Bean, deputy governor of the Bank of England, suggest they could rise steadily to 3% and then stay there until around 2019.
Slightly higher interest rates could motivate more people to save, assuming it is affordable, but the best motivation for saving is having a clear Financial Plan.
Financial Planning is important because it helps people relate their money to their lifetime goals.
It gives savings a real purpose, rather than using hackneyed ideas such as saving between three and six months of expenditure as an ’emergency fund’; a guide which is better than nothing if you don’t have a Financial Plan, but generally inaccurate for most.
Financial Planning can also help with a comprehensive review of expenditure, identifying opportunities to save money each month on unnecessary spending and cut tax bills, also freeing up money to allocate towards meeting financial goals.
Do give me a call on 01483 274566 to chat about how Financial Planning can get you on track to meet your goals in life, and most importantly keep you on track in the future.
