Today more than ever, we need to develop a sound practice of developing the habit of saving. As a country, we were far more disciplined a few decades ago than we have been in the last decade. Some may take comfort in realizing that we aren’t alone. In the United States, the economy collapsed in spectacular fashion just four years ago, mostly due to excessive consumer debt, fuelled mostly by a bubble in the housing market. It caused many people to thoughtlessly borrow more money against their home, and when prices started to deflate, they found that they owed more money than the house itself was worth. A wave of repossessions followed.
Fortunately, Great Britain has not had quite the same experience. But there is no doubt that we are also going through a recessionary period, which does not seem to want to go away. As a result, unemployment is higher than it should be, and those that are employed often worry about their jobs with understandable concern. It is important to continue the trend that began over 40 years ago, which is to maintain an average savings rate of just under 10% of disposable income. This will provide households with a cushion against unexpected expenses, even providing some additional retirement income down the road.
Our Children Watch Our Every Move
If you have children, you already know a simple truth. Especially when they are very young, our children pay constant attention to how we act, how we behave and what we do. It is truly one of their primary sources of clues as to how they should mould their behaviour. While every parent has a different style that they use to teach their children, one thing that they should always do is teach them the importance of frugality and saving. Regardless of where savings interest rates are at any particular time, it is a life lesson that they should learn as early as possible.
Obviously, the concept of saving is lost on any child who has not at least reached 10 to 12 years of age. They can’t truly understand the concept of money until that point, and any conversations on the subject will fall on deaf ears. But after that, parents can lead by example, by setting up savings accounts for each of the children, and either depositing a little money every month, or actually having the children deposit a portion of their allowance or any other income they receive from doing odd jobs into the account. This way, they develop a habit that can serve them for their entire lifetime.
Many adults who did not receive this valuable model from their parents regret not having been brought up that way. They may find themselves in middle age with little or no savings, due to bad spending habits and poor financial planning. They may in fact decide to take their own life lessons and teach their own children a different way to handle their finances.
Sachin is a US-based lifestyle writer covering the latest trends in modern society, and all of its implications. He writes on a freelance basis for many of the major lifestyle blogs.