The many reasons that make people savers or ravers
People in roughly similar financial situations often make completely different savings decisions, according to a report prepared by the Building Societies Association (BSA) that looked at how people arrive at their savings strategies.
When making the decision to save, people engage in a trade-off between the perceived costs and benefits of saving. There are many influences on this decision that help to explain why individuals in seemingly similar situations choose to save such widely differing amounts.
Barriers to saving include the perceived cost of foregoing current spending. Psychology also plays a part; for example, people place a much greater emphasis on sacrifices (like losing disposable income), than they do on gains (like building a pot of savings). The other popular option is dithering and continuing their consumption pattern while they “think about it”.
The report noted that people often rely on trust, word of mouth and adopt a learning-by-trial and error approach to saving. The less financially capable someone is the more their saving decisions are guided by these factors.
However, it was true of the majority that a life-changing event like having children can make people reappraise the costs and benefits of saving.
Adrian Coles, director general of the BSA, said: “This report looks deeper into how and why people come to the decision to save or not. It should go a long way to change people’s mindsets from thinking as saving as losing something, to gaining something.”