Sorted header abstract pattern
Sort my 6 Steps Tools Guides Blog More
Search Icon search small

back iconBack

Start here

Sort my...
A man and woman are walking together outdoors and looking happy

back iconBack

Start here

6 steps to get your money Sorted

back iconBack

All tools

Tools

back iconBack

View all

back iconBack

View all

back iconBack

More Sorted Info

Blogs
View all

Saving

Not all saving is created equal (hint: you may be surprised)

19 March 2021
Reading time: 6 minutes


Posted by Tom Hartmann , 2 Comments

What saving makes the most difference? Turns out some saving is not saving at all!

The most important saving is money put aside that actually improves your financial situation – now and in the future. It pumps up your financial security and independence. When you’ve got this sorted, you’ll have far fewer worries.

Let’s look at some things masquerading as saving that are not, and zero-in on what matters most.

First, let’s agree: spaving is not saving.

The idea of ‘spending to save’ (or spaving), is all around us. We’re not talking about real bargains on things you plan to spend money on. It’s more those deals that are aimed at getting us to drop money and not miss out.

For instance, I just had an offer come into my inbox to save $8 – as long as I spend at least $60 by Monday, 11.59pm. Time’s running out!

But if these deals are just getting us to spend more on things we hadn’t planned on, there is no saving – nothing being set aside for anything. True saving is stashing cash for something good.

Frugal living is not necessarily saving, either.

Spending less can certainly be a good thing. But the whole ‘avocado on toast’ uproar – where it was suggested that Millennials will never save house deposits because they splash out in cafés on the weekend – is laughable. You may as well just keep your spending to what makes you happiest and not feel deprived.

Saving $10 dollars just once won’t do much. It needs to be little and often, and more savings can be found in looking at how we rent or what we drive. For some of us, being overly frugal just causes splurges to happen at other times. Those small savings end up absorbed in our cash flow and then spent on a night out a few days later.

So sure, we may stretch our dollars further by living frugally, but unless we’re actually putting that money away in a separate account and investing it, there’s no getting ahead.

Short-term saving helps, but just a bit.

Saving up for things ahead of time should never go out of style. It’s still so much better to put money aside for upcoming purchases or for an emergency – it keeps us from racking up debt.

But the short-term stuff is still not the true saving that will matter in time. We save a bit up and then use it, rinse and repeat, but this won’t truly be getting us ahead.

So what saving counts most?

The saving we’re after is what truly moves us forward financially:

These kinds of savings either reduce your debt, add to your assets or accomplish a larger goal like buying a home. They’re the savings that will increase your net worth meaningfully.

Shannon Lee Simmons, author of Worry-Free Money, in fact, calls this “meaningful savings”.

“Meaningful Savings has the job of improving your overall financial wellbeing – debt repayment, retirement savings, saving up to buy [property],” she explains.

Tips to dial up your meaningful savings

Some things that will help increase your real savings are:

So how much of your savings is meaningful?

To answer this question, you could jot down a list, or you could turn to our very own budgeting tool.

By creating a category for meaningful savings, you can chart how much of your incomings you have flowing towards real savings. You can even create another budget just to geek out and play with.

You should include:

At the moment, the budgeting tool is telling me that my meaningful savings seems to be sitting at 17%. Is that good? Bad? Our situations and lives are all different. But the point here is – is there anything we can tweak to push that even higher?

Look for opportunities

Going forward, if you have any chance to increase your meaningful savings, jump at it.

And wherever possible, automate your meaningful savings each time you are paid, so it is ‘out of sight, out of mind’, growing in the bank or in investments such as shares. Thanks to compound interest, you’ll be surprised at how quickly it can snowball.

This is the sort of saving that matters most, and anything we can do to increase it dials up our wellbeing, security and independence that much quicker.

 

Comments (2)

Comments

  • Gravatar for Tom from Sorted

    19 April 21
    Tom from Sorted

    Thanks Andrew, spot on: include the amounts going into your KiwiSaver with your income, including your contributions and the employer and government contributions you receive (they're your meaningful savings as well). Then you can add those into a "meaningful savings" category in the budgeting tool to see how you are tracking.

  • Gravatar for Andrew Hayes

    14 April 21
    Andrew Hayes

    How should I cater for including the Kiwisaver contributions as meaningful savings when the budgeting tool is based on net income? Do I include them in the Savings master category but increase the Income Stream by the same amount?

RSS feed for comments on this page | RSS feed for all comments

Tags
Kids and money Budgeting Goals Scam alert Money mindset KiwiSaver Managing debt Money tips Investing

Recent Comments

Who’s teaching your daughter (or niece, or granddaughter) about money?
1 Comment

My Money Sorted: Hilary Barry
2 Comments

My Money Sorted: Ben
3 Comments

My Money Sorted: Daniel
1 Comment

8 ways to hack Christmas when you’re stretching the budget
6 Comments

6 ways to shop smarter this Black Friday
1 Comment

sign up bar pattern
sign up bar icon

Want help with your money coming straight to your inbox? Sign up to Sorted.