Money Your Budget Half of households are not saving. This could be why
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Half of households are not saving. This could be why

The Reserve Bank handed down its monthly interest rates decision on Tuesday. Photo: Getty
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Australians who struggle to save may have a personality type that gets in the way, according to a banking expert.

Research by ME bank earlier this year found that 51 per cent of Australian households are saving nothing at all, with many going backwards into debt.

nic emery me
ME’s Nic Emery says saving is a harder task for those of us who aren’t naturally frugal. Photo: ME

Nic Emery, who oversees the bank’s savings accounts, transaction accounts and credit cards, told The New Daily one explanation is that many of us are just “wired differently”.

His theory is that there are two types of people: those who naturally ‘plan for tomorrow’ versus those who ‘live for today’. The second group finds it much harder to save, he said.

“If you’re a ‘live for tomorrow’, then it’s like exercise – you need to get into the habit of it. It feels really hard until you start doing it.”

The 49 per cent of Australian households that do save tucked away an average of $779 a month, or about $9300 a year, ME found.

Of this group of savers, it was the youngest, the infamous ‘millennials’ of Generation Y, that reported saving the most on average: $848 a month, or $10,177 a year.

This is because Gen X, despite being in their peak earning years, are probably weighed down by the heavy costs of raising a family and paying for cars and homes, Mr Emery said.

Financial disadvantage may explain why many Australians cannot save. But for those who simply overspend, overcoming the ‘live for today’ mindset is crucial, he said.

“If you’re inherently not wired that way, and I count myself in that group, then you need something that automatically does it for you,” he said.

“The first step is to force yourself to sit down and work out how much you can afford to save out of each pay cycle and then to set up an automated sweep that sweeps that money into a savings account each month.”

The science behind it

Mr Emery’s theory seems to be backed up by a helpful book on the psychology of money, published earlier this year.

Mind Over Money, by Claudia Hammond, a UK journalist with two degrees in psychology, takes a fun journey through huge piles of academic studies that explain our odd financial behaviour.

Much of the research she summarises in the book deals with saving and spending. So if you’re a ‘live for todayer’, you might want to:

Talk about money more with your partner

  • Couples would rather talk about their sex lives than money, a study found.

Brush up on your mathematics

  • Children who are better at maths may be more likely to save for the future.

Pay in cash instead of card

Credit cards
Credit cards can be a real struggle to pay off.

Don’t be fooled by your credit card

  • By law, banks must tell you the minimum amount you can pay off your card each month. But UK academic Neil Stewart has found that seeing this ‘minimum payment’ may trick us into paying off less than we would’ve done otherwise.

Comparison shop

  • Hardly anyone seems to do it, according to this UK study. You could be missing out on chances to cut back your spending.

Try harder to save on big purchases

  • Many studies, like this one, have found that we dismiss a small saving on a big-ticket item because, in percentage terms, it’s a tiny fraction of the overall cost. But in absolute terms, a small saving on something like a house could be worth hundreds or even thousands of dollars.

Think about death when you’re flush with cash

  • Morbid, we know. But a study found it may decrease your chances of spending it frivolously.

Consolidate your savings

  • People who are not naturally frugal tend to overestimate how much they have in multiple accounts, and use this to justify extra spending.

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