Disposable income

[Hickson9]

I would like to raise the question of... How many people actually still actively make saving? By which I mean real savings.. ie, setting cash aside every month into a rainy day fund.(this does not include cash that you "Invest", which is different from savings.. but that is for another discussion).

I know that with interest rates so low that there is no incentive to save any more, and this is one of the tragedies of modern central bank monetary policy, that they have systematically destroyed the incentive for savings and punished the financially prudent at the expense of borrowers.

I do still have savings, and I'll tell you why.. Because, more than the return you get on your cash, it disciplines you to live on less than you earn. If you work for 20 years and spend all of your money each month, at the end of 20 years you have no financial means to support yourself for a single day thereafter. By contrast if you work for 20 years, save 30% and live on 70% of your income, at the end of 20 years you have saved 6 years' worth of income.. BUT as you have learnt to live on 70% of that, that 6 years will get you 8.5 years of living. If you can live on 50% of your income and save 50%, for each year your work you are effectively buying yourself 1 year of retirement.

I do mate. I've got a regular savings account that gives 5% which has a maximum deposit of 250 a month.

I then put the rest in to a single access ISA which pays 1.4% (rubbish I know but at the top end of the market when I was looking).

One thing I'm not sure about is how much of a pot to save before I begin to also invest in shares.

 

[gonetomorrow]

My pension is rubbish. If Mrs GT and I lie in a darkened room 24/7 we might get by.
Heaven knows we've had enough practice.

 

[Foot Long Hot Dog]

Yes, I do absolutely feel this. Interest rates should be determined by the balance of savers and borrowers, the equilibrium price is the rate of interest. Negative real interest rates should never happen in a free market (who the hell would loan their money out on the guarantee of a negative return?), they are only possible because of central banks' who operate under the false belief that lower interest rates stimulate the economy (they stimulate demand, but they also destroy the incentive to save and defer consumption, which is how real capital is stored and accumulated.. captial investment is what drives long term productivity and growth).

Interest is definitely not money for nothing. It is the return you are owed for deferring immediate consumption. All things being equal you would much rather have something now than have it at a later date. The rate of interest is the price that co-ordinates the deference of consumption across time.

Only we live in a consumer lead economy and deferred consumption doesn’t drive that.

I remember you arguing years ago that renting was a better option than buying as you predicted a massive property crash was looming, and you were completely convinced that you’re economic forecast made your decision not to buy in the SE an act of genius. Looks a crap call now like, as I said at the time. Oh well.

 

[Tramps_mate]

I do mate. I've got a regular savings account that gives 5% which has a maximum deposit of 250 a month.

I then put the rest in to a single access ISA which pays 1.4% (rubbish I know but at the top end of the market when I was looking).

One thing I'm not sure about is how much of a pot to save before I begin to also invest in shares.

5%?? Who with?

 

[Hickson9]

5%?? Who with?

Nationwide mate. Get on it, it's a great way of making sure you put away at least 250 a month.

Also if you get a recommendation link from someone for transferring your current account, which is really easy, you get 100 quid each. (Have to keep the account for 6 months)

In fact, I'd be happy to facilitate

 

[evilwebby]

It’s a good point, but doesn’t suit everyones situation. My house is worth more than my mortgage, so I can withdraw money against my house at any time, so don’t really need to save in the old fashioned sense. Financially, I am better off having a fund available to me at any time at 4% interest or so, than I am putting money into a zero interest bank account

Yes, once you have amassed some assets you then have more options available to you.. I'm coming at this from the angle of starting from scratch.

Get your outgoings under control so that you spend less than you earn, and with the difference, pay off debt and buy assets. It may seem like I'm trivializing it, but it really is that simple.

The most difficult thing is just making a start... it the more you do it the easier it gets.