Why is Saving Hard?

During a conversation last week a friend of mine admitted he found saving hard to do.  I asked him why he thought that was.  It was interesting to note that he said “You don’t seem to have much after doing it.”

Perception is a rather key thing with our minds and even more so with something astract as money and what you personally want money to do.  As my friend indicated saving is less about the actual results of saving, but rather people perceive it to be a lack of spending.  In order words some people focus more on what they could have bought with the money than the possible results of saving.

I suspect this gap exists in people’s perception because saving money takes a long time to create anything impressive.  Really for each dollar you saving you get about a whole four cents of ongoing income over a long period of time assuming it is properly invested.  Hardly impressive, actually it’s almost depressing to realize it is that low.  It’s only by slowly saving over years do you get to do anything truly impressive like buying a car for cash or after a really long time retire a decade or two early.

On the flip side of this I think perhaps consumer debt repayment is much sexier since the interest rates are much higher it is much easier to see some results.  If you are paying 18% interest it is fairly easy to see a significant drop in your interest payments over time with some debt repayment.

In the end saving is about shifting focus from short term gains to long terms gains.  Yes you don’t buy something today by saving, but rather you are buying a tiny bit of a future dream.  So slowly over time you end up where you want to be.  I wonder if this sudden mass acceptance of frugal will last and people will at least consider keeping some savings in the future.  Have we shifted a little bit from the “NOW” attitude to a bit of “I’ll do that later.”

What’s your thoughts on this: why is saving hard?

6 thoughts on “Why is Saving Hard?”

  1. I totally agree with you that many people definitely see saving as a lack of spending, and it’s probably a very large reason why so few people have been saving enough these days.

    I hope you’re right about people shifting away from the gotta-get-it-now mentality and leaning toward more saving and careful spending.

  2. A lot of people seem to view their savings through a weird kind of retirement lens–either it’s enough to support them forever, or it’s nothing.

    Personally, I always figured that a little capital was worth having for lots of different reasons. Having a little capital protects you in case of financial catastrophe–losing your job doesn’t force you to choose between debt and homelessness. Having a little capital increases your flexibility–you don’t have to take the first job that comes along. Having a little capital saves you money–stocking up on sales, higher deductibles on your insurance, better rates on loans, etc.

    I always thought just a little capital–earning just a little money–was valuable right now, just not just later. I’ve written about it several times. Here’s one post:


  3. Actually, to me saving IS a form of spending. Saving buys me FREEDOM.

    The freedom of saying goodbye to a job I don’t like at anytime, the relief from financial stress, the freedom to make different choices in the future, the freedom of being debt free.

    Someone who is tied with mortgage and car payments isn’t really free IMO.

  4. Nice post. I don’t think people in general will change. This may be a temporary shock but people will go back to the ‘have it now’ attitude.

  5. I agree with you as to why savings is so hard. The easiest way I found to do so was dealing with the thought process of a prospective purchase. I not only consider the cost of the proposed purchase(ex $1,000), but what the purchase would cost me in future value terms. In this case the $1000 purchase would actually cost me in excess of $17,000 at the end of 30 years(10% return). This made it much easier to to divert the funds into savings. Is the purchase a necessity or will it generate $17,000 in additional income over 30 years. After doing this for a number of years and teaching my children the idea, I had heard an interview with warren Buffet that had done the same process when younger. Here I thought it was an original idea.

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