Understanding the importance of savings
The concept of saving money on a regular monthly basis appears to be becoming a lost and outdated concept. The current generation of young adults have better access to goods and services than ever before and the result is they are able to travel, go to university or simply enjoy the things they wish to in life. Whilst older generations have of course had the same capabilities in decades gone by, the ease of access was certainly not as true and as such other things in life took priority; such as savings for example. Nowadays young adults have been born into a culture where ‘wanting it now’ means you can ‘have it now’. Not only is there better choice and selection across a whole host of different consumer markets but there is an increasing ability to use credit against purchases from the age of 18 years of age. As such, consumers are quickly and comfortably becoming adapted to making the most of the resources at their disposal. Whilst this arguably means that young adults are able to access opportunities which did not exist in years gone by, there is the consideration of the knock-on effect financially.
Generally speaking we live in a difficult financial time. Whilst access to credit continues to rise so too does consumer debt. Whilst I am not suggesting that all consumers and in particular all young adults are in a position of financial difficulty, there is an argument to suggest that when it comes to savings there is a lacking interest on the part of young adults. Given the recent Brexit vote and the reduction in interest rates paid by banks for savings account, is there really any wonder though? Currently the incentive to save appears to need to be an entirely solo desire. The banks do not appear to wish to encourage you to save and as such a lot of young adults appear to not be. This coupled with many people’s inability to get on the property ladder, means a lot of young adults are seemingly preferring to live for today and not worry about tomorrow.
Taking all of the above into account, allowing for a proportion of our income to become savings is never going to be a wasted effort. At the very least building upon a savings account will provide a financial buffer, should we ever need to do so. Many consumers, of all ages, live by the rule that they simply cannot afford to save any money on a regular monthly basis and although for some this may be true; for most this is not. The reality is many of us could and should make room for savings each and every month in order to avoid the potential need to borrow in the future. Whether this be because of a broken car or a desire to conduct a house improvement, having a savings account to fall back on will make this task much easier. Whilst we have certainly adapted to using credit to support our desire to go on holiday, upgrade our car or even purchase a jacket we don’t quite have enough money readily available to do so, this does not mean credit is always the best route. With any credit based commitment there will of course be a need to then make repayments over an agreed period to repay it. Whilst these repayments may be affordable, the commitment itself is therefore reducing the amount of disposal income we have going forward; causing a cycle effect.
Instead as consumers we should all be making the effort to save each and every month and then in doing so reduce our need to borrow money. Savings can be of any amount and can be adjusted to reflect the current financial month. Some months then it will be possible to save month than others, Christmas for example, is never going to be a month where a large amount can be set aside as savings. However there may be other months in the year where outgoings are less and instead of spending the spare money which is burning a hole in our pocket, we could instead save it. Sometimes saving money could be as simple as reducing your existing costs in some way or another. Take for example the amount you may spend on your weekly food allowance for example or the amount spent on clothing each month, both of these are classic examples where savings could likely be made should we focus our efforts to do so.
Representative Example: Representative 1286.98% APR on a loan of £300.00 with 5 monthly repayments of £101.03 Total amount repayable £505.13 Annual interest rate (fixed) 290%
Warning: Late repayment can cause you serious money problems - For help, go to moneyadviceservice.org.uk
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Author: Internal Customer Services Agent