The relationship between saving motives and saving habits

Before we dive in, take a moment to consider which of the following best describes you and your household in terms of your current saving habits?

• Save regularly by putting money aside each month.

• Spend regular income and save other income (such as investment income, bonuses etc.).

• Save the income of one family member and spend the other.

• Save whatever is left over at the end of the month (no regular plan).

• Do not save.

Saving motives and saving habits 
When it comes to the saving habits of households, there are often three distinct camps, the regular savers, the irregular savers and those that do not save (the non-savers). Interestingly, there is often a relationship between saving motives and saving habits*.

Importantly, saving motives can include things such as, for retirement, for children’s needs, to buy a house or consumer durables (e.g. fridges, motor vehicles etc.), for holidays, for emergencies and to have funds in reserve for necessities.

Here are some interesting findings regarding the relationship between saving motives and saving habits:

• Someone that has a motive around saving for emergencies and/or retirement is more likely to be a saver, whether regular or irregular.

• Someone with a high income and/or medium to long-term saving horizon is more likely to be a saver, whether regular or irregular.

• Someone with a low-risk tolerance is more likely to be a non-saver.

Also, if we look at people that save regularly versus irregularly, regular savers have a more positive relationship with a retirement saving motive, a high income and/or a long-term saving horizon.

With the above in mind, it’s important to remember that the source of your wealth creation is you. For some of us, saving may be second nature or come easy due to circumstance, whilst for others, it may be more of a struggle. What is important is to enjoy life now whilst also taking the time to make sure this enjoyment flows through and is experienced by your future-self as well.

By having a clear picture of why you need (or want) to save, as well as the motivation and roadmap to achieve it, you might just find this makes all the difference.

The current climate affecting savers
Admittedly, the recent economic environment, namely slow wage growth and the rise in the cost of living may be disrupting the efforts of savers through the need to divert more of their disposable income away from saving to spending.

Unfortunately, the impact of this may be evident in the survey results from ASIC’s Australian Financial Attitudes and Behaviour Tracker (Wave 5). For example, of the Australians surveyed:

• 23% saved money using a savings account that was automatically linked to their pay. This is down from 24% in the previous survey (Wave 4).

• 31% saved money using a savings account that was not automatically linked to their pay. This is down from 38% in the previous survey (Wave 4).

• 16% saved money but not through a savings account, for example, put money in an envelope or money tin. This is up from 13% in the previous survey (Wave 4).

• 12% saved money by making voluntary contributions to their superannuation account. This is down from 13% in the previous survey (Wave 4).

• 20% saved money by paying more than the minimum amount off their mortgage or other personal loan. This is down from 22% in the previous survey (Wave 4).

• 23% saved money without having a savings plan in place, namely, earned more money than what they spent. This is down from 24% in the previous survey (Wave 4).

• 21% did not save any money over the last six months. This is up from 19% in the previous survey (Wave 4).

Moving forward
When it comes to saving, it’s important to understand the positive effects associated with saving a portion of your income from employment each payment cycle. For example, saving can help with:

• Your capacity to establish and build-upon an emergency buffer (e.g. for unexpected events, such as job loss, medical/dental emergencies, or home/car repairs).

• Your capacity to work towards your financial goals and objectives (e.g. retirement security, paying down debt or purchasing a home).

• Your capacity to utilise and rely on your cash/debit cards, as opposed to credit cards, to meet lifestyle expenses.

For those savers impacted by the current economic environment, some relief may be on the horizon if several of the Government’s 2018 Budget proposed measures are legislated and come to fruition, such as the 7-year personal income tax plan.

In the meantime, it’s important to take stock of your existing financial situation, goals and objectives. This may involve, a closer look at your household expenditure to see whether there are areas were surplus income could still be realised, as well as the continuation of tracking your spending and comparing the results to your budget planner.

And, for the non-savers out there (with the capacity to save), we encourage you to read several of our past articles, which may help you kick-start some beneficial saving motives:

• Running the retirement planning race.

• The marshmallow experiment and personal finance.

• Future-self continuity: Preparing for the future.

*Fisher, P.J., and Anong, S.T. (2012). Relationship of Saving Motives to Saving Habits. Journal of Financial Counseling and Planning, 23(1).