Saving is like taking exercise. We all know we should do it but find excuses or reasons not to. According to a survey by Lloyd’s Bank in 2019 as part of their ‘How Britain Lives’ study, a third of British adults do not save money regularly, with one in five unable to survive longer than a month on their savings if they were to lose their job, and 30% able to survive no longer than 6 months. Saving is a crucial way to give financial security for that rainy day, especially with the uncertainties and pressures on livelihoods from COVID-19 or to allow for those little luxuries in life.
As part of the ‘What Works’ project funded by the Money Advice Service, researchers in the Centre for the Business in Society at Coventry University undertook at set of before and after interviews with participants that had completed a ‘Managing my Money’ course developed at The Open University. The course focussed on giving participants tips and to develop skills for saving and budgeting.
In these interviews participants talked about their experiences of saving and the challenges they encountered. There were a range of explanations given for why people did not save ranging from external factors, such as low income, loss of job, pester power of children and internal factors including, wanting to spend money on going out, impulse buying or ‘wasting money’ on unnecessary things. Many of the participants were frustrated that they could not save regularly as they knew it left them vulnerable to meet that unexpected bill when the washing machine or the car went wrong. Not having savings prevented them from having a holiday or getting that long dreamed for new bathroom or car.
However, we also found some interesting tips on how to save even when money was tight. One participant talked about a community led saving scheme, called a ‘Pardoner’, more common in Asian and ethnic communities. The idea is to pay in a small amount on a regular basis and then through a draw, you receive a lump sum to pay for that new washing machine or presents for Christmas. Others that were members of a credit union found the ‘inaccessibility’ of the credit union a great way to save. Credit unions, traditionally, are financial co-operatives set up by members with something in common to benefit their community, not always with online banking facilities. If you wish to withdraw money you may need to physically go to the credit union. This physical barrier of needing to make a journey was often enough to prevent people from withdrawing their savings and in some cases, to forget the money was even there.
The Managing My Money course and the free to download and use MoneySkills app, developed by Coventry University, encourage people to draw up a budget to help make ends meet and then to put a small amount of money regularly into savings. It could just be a few pounds each week, but by doing this often, it soon builds up into a more substantial sum that could pay for a new washing machine. So, when you are sitting on the sofa procrastinating about taking exercise, perhaps think about putting that spare change in your pocket into the piggy bank.
Turning to the big initial conundrum, “I can’t save because…”, our informants suggested some reasons why it is hard to save but also some possible solutions to save more every month.
“I don’t have enough money at the end of the month.”
Many participants found the ‘1p challenge’ incredibly helpful. They saved one penny on day 1, 2p on day two and so on. After 365 days, they would end up with savings of over £650.
Some found it useful to set up a direct debit into their savings account at the beginning of the month instead of at the end, so it just became like another bill.
“My kids are my priority.”
Having priorities worked well for a lot of participants as a way of working out what was and what was not essential, and to help motivate them to save.
“I don’t know how to save.”
Our participants realised that saving is, in fact, relatively easy. We have developed the MoneySkills app, free to download and use on iOS and Android, or in a web-based format. The app helps you to create a monthly budget that helps visualise the income, the expenditures and the savings.
“My rent/mortgage and bills are too high.”
Housing expenses like rent and utilities should be around 35% of the household income; however, it can fluctuate to almost 50% depending on which area. Our participants found extremely useful and cost-effective to shop around and visit the comparison websites to find cheaper deals. By switching to a more affordable provider, some participants manage to save at least £50 per month, i.e. £600 per year. Other participants got rid of their credit cards with an expensive interest rate to pay or transferred the balance to 0% options.
“My partner spends all the money.”
Many of our participants said they found it hard to talk to their partner about money. Some found it helpful to work together to develop monthly budget and decide together how much money to save per week. A shared goal was useful.
For further reading about our interventions and the findings of our research, please see the final project report and other publications.
Brambley, W. Dibb, S, Appleyard, L., Aslam, H., Roby, H. et al., (2019). MAS Project Report – Managing My Money for the Just About Managing. Open University and Coventry University. https://www.fincap.org.uk/en/evaluations/managing-my-money-for-the-just-about-managing
Dibb, S., Merendino, A., Aslam, H., Appleyard, L. and Brambley, S. (2020) ‘Whose rationality? Muddling through the messy, emotional reality of financial decision-making’, Journal of Business Research https://authors.elsevier.com/c/1c03UXj-jVaz5
Appleyard, L. Dibb, S. and Aslam, H. (2020) Financial capability: Supporting credit union members towards greater financial wellbeing, White Paper for Centre for Community Finance Europe. https://cfcfe.eu/wp-content/uploads/2020/09/202013_CFCFE013_Members_Financial_Capability.pdf