Drop in Number Saving for Retirement
The number of NZers saving for their retirement has dropped for the fourth consecutive quarter from a high of 62% a year ago, to just 54% in the latest Saver Pulse Survey.
In the first quarter 2002, one in four (24%) people in high-income households ($70K plus) are still not saving for their retirement. Of the people not saving at all, 38% are in the higher income households ($50K plus) and 41% are in the middle age groups (30-49).
The results show almost one-third of these people are aged 40 or more, just over a quarter work fulltime, and 45% earn more than $30,000 per annum.
The results also show that increasingly, the kiwi “Do It Yourself” mentality is spreading to managing money too. Of those who do have savings (for retirement or otherwise), 56% take no advice on their savings or investments.
Of those who do take advice, 19 % turn to their bank, 18 % to an investment advisor or financial planner, and 7% use a combination of the two. However, a higher number of people (74%) are satisfied with the advice they receive from their financial planners and investment advisors, than from their bank (68%).
The Internet is an increasingly popular medium for NZers to make their investments, up 5% to 35% of those surveyed. More than a third of respondents said they would be happy to use the Internet to make investments if it was with a well-known company.
Attitude is Key to Savings
Results from a new Colmar Brunton report (“NZers: Their Attitudes to Saving”), commissioned by AMP, finds that attitude is the main driver of savings behaviour, with income neither the motivator for people who do save, nor the main barrier for people who don’t save (results that tally with UK research). Essentially, the report is saying that NZers are poor savers and go into debt to pay for lifestyles they cannot afford.
It appears that most people simply don’t recognise the problem debt can create for them. The research found that some people tend to gloss over debt in their minds, often ignoring the impact of credit cards and hire purchases. They are better saving short-term to buy things, often using a debt component as well, rather than saving for the long term and leaving the money untouched.
Other findings include:
- people don’t save for a variety of reasons, including poor knowledge and planning skills, wanting things now, conflicting priorities, paying for children’s education, supporting their parents and living beyond their means;
- some people believe that paying off the mortgage is saving, yet they expect to live in the family home when they retire;
- people who don’t save actually want to save, but can’t find a way to do it effectively; and
- because each person is unique and behaves differently, a “one-size-fits-all” solution to this issue is unlikely.
The Psychology of Desire
Income impacts on the amount each of us can save, but not the desire. The researchers came away with the impression that some people have learned to be savers and that savings and debt lessons are learned fairly early in life. It seems that successful savers speak of putting money away before they see it, whereas less successful savers try and find the money to save after they’ve paid for everything else.
Understanding the psychology of savings behaviour will hopefully lead to more effective ways of encouraging people to save (that is, how to save) – rather than, for example, simply telling them to “save more”.
Lessons for the Finance Industry
For it’s part AMP says there are important messages for the financial services industry, including banks, in the research. It reckons the report shows that as a nation, we’ve grabbed at debt with alarming speed, including promoting it to young adults without them fully understanding the consequences.
Key messages from the industry have to change, therefore – from a “buy now, pay later” mentality to one where the merits of savings over debt are clearly demonstrated.
The industry needs, more specifically, to:
- help people make informed financial choices by providing good, clear information and appropriate products and services;
- push savings products with as much enthusiasm as it pushes loans and the availability of credit; and
- encourage young savers.
Contact for Enquiries
The Ministry of Agriculture and Forestry
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PO Box 2526, Wellington
Tel: 0800 00 83 33
Fax: +64 4 894 0720
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