Subscribe to this BlogNew research sheds light on the habits of successful savers
One of the infinite ways in which you can divide up the world into two types of people is savings behavior. People are either diligent savers or they aren't; likely, you know where you fit in without being told.
But other than the habit of savings, how are savers and spenders different from one another? Recently, I saw some research from HSBC Direct which sheds some light on the subject. In a survey of 1,000 people–two-thirds of whom had household incomes of at least $100,000–the bank found a few interesting differences between the 22% of the population that the bank designates as "active savers" and the not-so-active rest of us. (Click on each of the charts below to see larger-sized versions with more information; in all of them, the red bar signifies active savers while the blue one represents not-so-active ones.)
- Active savers start early. Seventy-three percent of them say that their parents taught them the value of saving money, compared to 56% of the so-so savers.
When learned to save
Non-savers had a greater likelihood of being "scared straight" into saving by a bankruptcy or significant debt.
- Active savers are less hedonistic. Maybe that's obvious. But I wanted to point out that active savers are more likely than sluggish
Why people save
savers to put money away for retirement and a general sense of security, while they're much less likely to sock away funds for a vacation.
- Active savers know their limits. When asked what would improve their current financial situation, they're less likely than their counterparts to say they they could reduce their expenses.
Improving finances
Hey, they've already reduced them, and they know it.
- Active savers are happier with their current financial situation. Now, are they happy because they're savers, or are they savers because they're happy?
Saver lifestyle & finances
I don't know. But if you're not an active saver, why not join the club and see if it improves your mood?
"Who is John Galt?"
In order to preserve wealth, first you need to know what wealth is and what it isn't. This is not as easy as it sounds.
Always remember that the value of a dollar has been going down for the last 96 years, courtesy of the Federal Reserve. When you save, search for something that keeps its value through times.
I am retired, age 62, not yet on Social Security. My monthly after withholding income is about $3,000. I save $1,000 of that. No cable TV, no big screen digital TV, no cellphone. My vehicle is 8 years old, and I will drive it another 2 or 3 years. Life is good!
My story is a bit different. I have always been poor. Actually, I've always have been rich. Sometimes, it may just be how I look at things.
But I've never had much money, but I always pursued my dreams. Somehow it just worked.
I got lucky in real estate a few years ago and made a lot of money. I definitely now live within my means, but with my new found nest egg, absolutely no bills, life is one hell of alot less stressful.
When I was 19 and a poor college student I needed to find a way to about $150 in beer money go farther over the next 2 semesters. Instead of drinking the money I used it to buy tools and set myself up doing car repairs for other students. $600 or so later I have paid for teh tools, drank plenty of beer and had some money left over to invest.
The lesson learned was that you can use money to make money, regradless of whether it funds a side job, rental real estate or investments. Over the years the yield from investments has exceeeded my annual income. I've come to understand that it isn't the pile of money per se, but the income that you can derive (and spend0 that brings real power and a buffer from unanticipated events.
The trick is to start early and keep your investments separate from your daily living expenses.
There are two things you can do with money: spend it or keep it. If you spend it, you get STUFF. If you keep it, you get POWER. Which is more beneficial: stuff or power?
Learn to use Quicken or Microsoft Money and balance your check book every month. Look at your net worth report every month. What you track will improve.
As someone who learned the hard way of digging out of $67,000 + of cc debt 10 years ago , I'm much happier that I'm in control of my finances and value the true meaning of living comfortably even if in a troubled economy . It's bad to see many people who should be retiring as I have looking for jobs . I live with my means by eating at home , have cut expenses by shedding $100 + off my living expenses ( under $2000.00 per month ) , save my loose change ; I have more money coming in than going out . Life is great .
I'm a saver, however not a super saver(one must enjoy life a bit!). I think the key is to start while you are young. Put something away every month even if only $25.00 per month and stick to it. Have only one credit card and pay it off each month(use their money for a month). LIVE WITHIN YOUR MEANS!! The last suggestion is perhaps the hardest to live with but it has served us well over the years in conjuction with prioritizing what you spend your money on.
I am so much happier as an active saver.Sean
It sounds like everyone in the US is a saver, huh…I wonder how we have racked up so much debt and got ourselves in such a huge pile of dung then? I think there are some that are not being honest 
Back in the 70's, had the chance to go to a prestigious Catholic U. with a gold dome but chose not to since I was paying my own expenses and didn't want to go into debt. Never regretted going to the top state U with one of the most beautiful campuses in the US.
I became a saver out of financial misteps in my 20s and an unexpected career crisis\job loss, but I always had the tendency even when I didn't follow it. Went thru CCCS to pay off credit cards and started mostly doing the right thing. Paid off the car and didn't buy another (still running great after 13 years and 170k miles). Was working on paying off the house, but am diverting extra to the stock market via RothIRA and 401k, because I too am "greedy when others are fearful".
I'm 40 now and would like to be debt free by 45 if possible, and have more flexibility to pursue more purposeful work.
Good luck everyone, and send this article to your non-saver friends. They'll come around eventually (maybe).
I am a very active saver. I don't make much money, but I save because I can live with what I have. My friends call's me cheap sometimes. Not everybody can do what I do and feel fine about themselves. I understand the value of money. I don't need a cellphone or a car or cable TV or internet or dry cleaning or dinner outside, Starbucks, I live with my wife and kids at my mom's place, etc. Don't get me wrong, I do spend money on things, but not going crazy like other people. Lucky I am married to a girl that can take this or else she would have divorce me. That's how I save alot of money. I have alot to say but I must keep it short.
A long time ago a friend taught me to give sizable chunk of my income away and then plan how to use the remainder. I think this forces us to be content with less which then makes it easy to save – even with a large family and a wife who stays home to raise the kids.
Contrast this with the greed of the hedonist, Big Government, DINKs and where we are today as a society.
The best advice I learned was always to "pay yourself first". What you don't see or receive in your paycheck you don't miss and it certainly adds up quickly. Also, each time you receive a raise, add this amount to your savings as you got along without in the past. But, I always keep in mind that this life is not a "dress rehearsal" so I do my best to enjoy life to the fullest in a frugal way. The most wonderful memories that I have didn't cost a cent!
The key to being an active saver is attitude and reconition of value. Whether I was a busboy or VP I have always saved 20% of what I earn. Although my family income currently puts me in top 1% of the country I have bought more pre-owned cars than new, I return cans for redemption, I try never to pay retail (especially in this environment), no country clubs, you get the idea. I always remember that Warren Buffet still lives in his first home and that he drives an 8 year old car. Max out your 401k each year and start a 529 asap. Listen to CNN's on the money each night for a year for pointers.
I am a very active saver, since I paid off my student loan last year. But I don't agree wit the self-righteous spirit I sometimes see in other active savers, who make snide comments on others who do not pay off CCs every month, or brag about how their returns are financed by those less intelligent (or less fortunate)?
I'm 24. I save more than all my friends, but not because I'm smarter – I just make more money.
My wife and I have incomes that puts us in the bottom 50% of all wage earners….but our house and cars are paid for…..we have no debt…..and at age 52 we almost have enough savings to not work anymore unless we just want to. I'm sure there's a lot more "stuff" that we could have purchased over the years….but for the life of me I can't think of anything we could have purchased that would have brought us as much joy as the joy we have in knowing that we only have to work if we want to
My husband is a super saver and I just follow him, because I saw what he accomplished before we got married. Eventhough he has a guaranteed pension and we both have matching 401k's we are still saving everything we can. We have a budget that we follow every month. It works. Even if we would to pass before retirement, we can live a very peaceful life knowing that we don't have to worry about retirement. We don't have any of our money in the stock market. As far as we are concerned, it's a scam!!!. While a lot of people around us are struggling in this economy, we live a very confortable life with virtually no worries. Being a super saver is a life saver, since stress and sleepless nights are not deteriating our health.
Nobody wants to be the guy who croaked the day after he retired after working his fingers to the bone and saving every penny for 30 years.
But it's much, MUCH more common to be the guy who didn't save enough and is scraping to get by in his 70's…
I think there needs to be a balance – enjoy the now, but not by sacrificing your future.
I've heard the argument that credit cards cause you to spend more. In my case, I don't believe it. I use my credit card to pay for everything and then pay the balance in full every month. When I go grocery shopping, I don't spend more simply because I pay with a credit card. I have a budget as to what I want to spend every week and stick to it.
Angela, I agree with all the benefits of credit cards you've listed. I actually have two cash back credit cards that have different payment dates (one in the middle of the month and the other at the end of). This way I can keep my money in the back for the maxium period of time to earn interest.
However, opponents of C.Cs will tell you that people who own C.Cs will spend more then they would with cash. Unfortunately, I think they are right on this. If you walk into a grocery store with $60 in cash……that is all you are going to spend.
Saving has been good to me. It helped me get through past collapses, and it still helps me to sleep better every night. Investing is another story …
Like most people, I've had losers and winners. Fortunately, I've had more winners than losers.
The winners were not such big surprises: under-valued stocks (that regained their true values) and treasury bonds (I like TIPs) have been my heroes.
The losers have been surprises: finance and growth stocks. Tech stocks were going to grow to the sky (to infinity and beyond), and banks were going to finance everything under the Sun. Oh, well.
Going forward, we need to be more careful. Stocks will always be risky, so we need to limit our exposure to them, certainly not more than 50% of our portfolios should be in stocks during or near (5 years or less away from) retirement. In addition, bonds can be very risky (Lehman bonds, anyone ?), and they don't pay nearly enough interest to compensate for their risk.
A good combination could be carefully-chosen ETFs or mutual funds for stocks plus treasury bonds. And, make sure that your cash is FDIC-insured.
Jayson – Savings is anything you keep and don't spend. Doesn't matter if it goes into a simple savings account, a CD, an IRA, a 529, or a 401(k). Those are all just VARIETIES of savings vehicles.
It is about time that someone creates an easy, safe savings tool for young families. We receive way too much junk from family, PiggyBanc helps us to build a savings strategy for our family.
I have used that PiggyBanc.com company. Incredible how easy it is for me to contribute to my nephew.
I am definitely happier when I have money in the bank verses debt.
However, as a small business owner, every penny I save in a year plus some gets paid to the IRS in April. So much for incentives.
Jayson: No, retirement "investment" and "savings" are the same thing. It isn't as though "savings" should be put in a bank savings account and retirement money in the stock market. All of the money you save, regardless of how it comes out of your paycheck, should be put into portfolio of investments in which the risk-reward ratio is balanced for your age. What one puts savings into can include stocks, bonds, real estate, gold or anything else, but it shouldn't all be in one place. Achieving an appropriate balance is the key.
A suggestion to Chris, Eagan, MN – Since you pay all your bills first, then you spend the remaining available funds, You control your spending very well. It will be to your benefit to use credit cards with cash rebate or cash rewards. In this way, you are getting paid 1% – 6% by the credit companies, depending on the offers on various cards. You also keep your money in your bank account longer to make some interest off it, because you pay your credit card company only once a month.
There is this great company that makes it easy to instill a habit of saving within young families. PiggyBanc works with credit unions that are in the shared branching network. Our family members and friends have helped our kids save a bunch of money.
Charlie in Liverpool, you seem to have confused a retirment investment with savings. As we have all seen over the last two years, these are two very different things…
I couldn't help but notice that 5 of the 6 postings thus far identify themselves as big savers. (The 6th–Eric—didn't say explicitly one way or another but I'd guess he too is in the club. I am guessing there is a perhaps statistically significant message in this observation.
I married an active saver, and I was good with that for the first ten years we were married. Then 17 years ago I got as life-threatening illness that I managed to survive. Now, I think: yeah we need to save, but we need to balance that with the things we want to do before we leave this earth and this "Vale of Tears".
You only get one go round. It was be a shame to let only the heirs enjoy all the things that I wanted to do.
I'm a big saver too having learned from my parents who took me to a bank to open a savings account when I was in 2nd grade. The concept that money could grow without work was very appealing.
This was confirmed in 7th grade when my math teacher had us calculate the difference between two savings accounts. One with 5% simple interest and one with 5% compound interest. The scenario was Jesus (probably can't do that in a public school any more)put in a dollar in each account. What would they be worth today. Since that was pre-calculators with compounding keys, I was amazed at the size after multiplying 1.05 a few hundred times.
The nice thing about living within ones means is that other people subsidize it by paying interest and generating returns that capital offers. Nothing like having people who aren't so bright working for you!
What angers me is the loss of my savings ( over 50% last year alone) through no fault of mine, or the hidden tax of inflation that makes the money I have saved less valuable as I get closer to retirement age.
-Charlie from Liverpool
While I agree you cannot do anything about inflation, the loss of 50% of your saving so close to your retirement age is your fault. You should have in no way been so deeply invested in stocks, which is the only way you could have lost over 50% of your savings in one year, so close to your retirement age. Judging that you have been working for at least 40 years, you should have had over half your money in bonds or cash where they would have been much more protected. While it is a great thing to find a lifelong saver these days, a poor strategy can cause just as many problems in the long run…
I am also a big saver, and always have been. My parents taught me about money and compound interest when I was very young. I've had a bank account since I was in elementary school. My parents were never in credit card debt, and we never had bill collectors calling.
Now that I am out on my own, I have a very detailed spreasheet of my spending habits. I find it very easy to save when I know how much has already been spent.
I have lots of 20-something friends who are mired deep in debt, and I hope one day they will see the light and start saving for the future.
Nice review, I too have been an active saver over my near 40 years of working life. What angers me is the loss of my savings ( over 50% last year alone) through no fault of mine, or the hidden tax of inflation that makes the money I have saved less valuable as I get closer to retirement age. Though after last year my new retirement age is 82. LOL
I think many savers save because they're already lived the alternative – being poor. Let's face it, if you've gone through a time where a single sandwich cookie was the payday "treat," then you probably can appreciate the value of having money in the bank.
In my situation, I'm a big saver because I derive far more value from having money in the bank to cover unexpected expenses than I would ever get from a new car, which would be a source of expense and stress (I'd constantly be worried it would get dinged).
And for myself, bargin shopping and clipping coupons ARE fun for me. They ARE my entertainment. I pride myself far more for my ability to feed 6 people a healthy, yummy meal for under $5 than I do from showing off overpriced new shoes.
As for keeping up with the Jones' – never going to happen. In reality, the people who live extravagent lives are usually doing so on credit. They are one disaster away from ruin and I know it even if they don't. I do not feel envy, but rather pity for them.
I am a big saver and I do feel happy because I save! I went from being debt ridden in my 20's and now debt free now in my late 30's. I hated those days of handing my paycheck over to creditors.
I feel great knowing I put away a chunk of my paycheck each pay period into savings. It's great to make all my purchases with a debit card instead of a credit card.
It's exciting watching my savings grow each paycheck.
I wonder if I save too much, because at times I don't have enough money to splurge on entertainment with my friends too often. They don't save!
My friends are always showing me their new cars (every 2-3 years), fancy vacation trips they take each year and all the latest gadgets they buy. I also get to hear them complain about all the bills they have.
Don't get me wrong, I go out and travel but I do it based on the cash I have left over after I've paid my monthly living expenses.
Saving works for me because I've been on the other side of the fence and I remember how much I hated it.
Working on making the 1 million dollar net worth mark, and am up to $850K. Worked my way through college to get an engineering degree. 44 years old. Grew up in Western Kentucky farming community. Have a small $75,000 debt that I can pay out of available savings at any moment. It can be done, and I encourage others to do it. My wife have always lived by the rule "live beneath your means". It works.