As a country, the UK is shocking at saving money.
There are various reasons for this, including slides in disposable income, political turmoil, and macro uncertainties, such as Brexit.
British households are saving less than at any time since records began more than 60 years ago.
In the first quarter of last year, the UK saving ratio shrank to 3.3 per cent, its smallest savings ratio since it started being measured in 1963.
In fact, Aviva’s recent Real Retirement Report shows that 18 per cent of UK workers in their fifties and sixties are unable to save anything for their retirement, while millions more are unaware of how much they need to be able to retire.
More needs to be done to address this issue, and a large part of that involves educating consumers on the savings options available to them beyond basic current accounts and Isas – such as fixed-rate investment bonds.
But there might be a deeper, more ingrained reason for our lack of savvy when it comes to savings, and that is language and culture.
Your future self
You’ve probably noticed that, generally speaking, some countries are much better at saving than others – we all know for example that “Germany saves” when “Greece spends”.
A fascinating study from Keith Chen, a Yale University behavioural economist, has actually found that people save more (or less) depending on the language they speak – more specifically, depending on how that language differentiates and distinguishes between the future and the present tenses.
Chen’s study found that people who speak languages requiring a separate future tense – English, Arabic, Greek, the Romance languages – are far worse at saving money than people whose languages don’t really distinguish between the future and the present, like Chinese, German, Japanese, or Norwegian.
For example, unlike in English, the form of a Chinese verb never changes, regardless of whether it is present, past, or future tense. In English, the verb “eat” will become “ate” for past tense, but the Chinese verb 吃 (chī) stays the same.
Chen argues that these contrasts make people think differently about the future and, in a subtle way, might make your future self a little harder to relate to – therefore impacting your motivation to save for a rainy day.
In fact, after factoring in people’s education levels, incomes, and religious preferences, Chen found that those with different verbs for present and future were 30 per cent less likely to have saved money in any given year, which is simply astonishing.
While this hypothesis might sound a bit fluffy to many, it’s further backed up by recent research conducted by central banks.
Benjamin Guin, an economist at the Bank of England, analyses the extent to which households’ exposure to cultural groups can affect their savings decisions.
He uses Switzerland as his testing ground, in order to analyse how people’s exposure to different language groups affects their savings decisions.
The country consists of two major language groups – German and French. The speakers of these two languages are located in regions that are separate but geographically close, and almost all policies and laws are set at the national level.
Comparing the financial decisions of relatively similar households on the German-speaking side of the country to those on the French-speaking side, it has been documented that households in the German-speaking part are on average saving 11 per cent more than their French counterparts.
This difference in saving mentality isn’t limited only to language though. How, and also what, people save generally differs hugely by country and culture.
Different cultures hold different perceptions of what is valuable.
It’s also worth pointing out that saving doesn’t just have to be money in a bank account earning interest.
All around the world, people of different countries, cultures, and classes have their own perceptions of saving, and the means by which they do so. In remote parts of the world, particularly rural areas, money may not even be used on a day-to-day basis, and savings may not even be monetary.
Lost in translation
So how does the world save? Here are a few examples.
Typically in the UK, much of what we set aside goes into savings accounts or is tied up in real estate. This is missing a real opportunity to make money work harder, and more needs to be done to make consumers aware of what’s available to them.
In Russia, saving is generally not a trend. Two thirds of Russians do not set anything aside. Those who do entrust their money to real estate or gold.
South Africans band together in informal saving associations known as “Stokvels” in order to microfinance each other.
In Rwanda, any savings go to “Chamas”, the Swahili term for informal investment groups in communities to pool capital for local projects.
In countries such as Greece and Argentina, those that do save tend to hoard hard currency in their homes – under the mattress, as it were.
In Thailand and the Philippines, ornamental goods, such as jars and jewellery, hold more prestige than any savings, and this is where much of any capital put aside will end up.
Read the signs
With all this in mind, a lot of us might feel like the way we use words affects our thought process, and in many cases this can be true. Where we’re based geographically also holds sway with how and what we save.
But no matter what language you speak, you should make sure that whatever and however you save makes sense to you and the goal you’re working towards.