A Nation of Money Saving Experts?

If recent past history is anything to go by, the UK is not a nation of savers. This year, the UK savings ratio fell close to 0% a post war record. Levels of consumer borrowing have reached record highs - in terms of both secured borrowing (mortgages) and unsecured borrowing (credit cards and personal loans. In a bid to avoid recession, the government have borrowed heavily in order to finance tax cuts and hopefully stimulate the economy.

However, the global credit crunch and series of financial disasters have helped to shift consumers’ attitudes about spending and saving. There is a general feeling that we have been borrowing too much and saving too little. It is suddenly no longer cool to be buying on plastic and remortgaging to the hilt to afford a new luxury car. Instead the new vogue is to display frugal shopping habits. - Cut price supermarkets like Netto and Aldi are doing very well.  More upmarket food retailers like Marks and Spencer are having to entice customers with price cuts.

It is becoming more popular to look for ways to save money and display frugal spending habits. E.g. avoiding unnecessary Christmas presents.

Any move towards deflation would increase this new incentive to save. As people will delay purchasing in the hope that prices will become cheaper in the future.

This new frugality, is one reason why the government’s tax cuts and the interest rate cuts are not encouraging spending. For example, people are using their lower mortgage repayments to pay off more of their mortgage debt.

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