“There’s no way I can afford to save €283 a month,” a myriad of callers told Newstalk 106-108’s ‘Breakfast Show’ last Wednesday after they ran a report about the latest Postbank Savings Index take on the average level of savings.

The following morning, Newstalk asked yours truly to provide a profile of the sort of people that are saving, and I duly pointed out that the €283 is the ‘average’.

This literally means that half the respondents to the Millward Brown Lansdowne survey at the end of December/early January, are saving up to that amount and the other half in excess of that amount.

On which side of the average you fall depends very much on your age and the amount of debt you are carrying.

But overall, 40 per cent of those surveyed reported that they had no debt, and it is this proportion of respondents who clearly are the ones who account for the bulk of the higher amount of savings.

For example, 50 per cent of 18 to 24-year olds have no borrowing while a quarter of 25 to 34 are debt-free.

Some 27 per cent of 35 to 49-year-olds have no borrowings; with 42 per cent and 70 per cent the figures for the 50 to 64 and 65 plus ranges respectively.

Interestingly, the people who are in the greatest debt, the 25 to 34-year-olds and the 35 to 49-year-olds are also the ones who are both reporting that they intend to spend less in 2010 (54 and 60 per cent respectively) and will decrease their borrowings (30 and 37 per cent) the most.

The amount the 25 to 34-year-olds (the age group with the largest first time mortgage take-up in recent years) are also among the highest savers at €356 per month, compared to €270 for 35-49 year-olds and €277 a month among the 50-64 year-olds.

Pensioners save an average, for their age cohort, of €258 per month.

While 76 per cent of the respondents are saving regularly, that figure is down about four per cent on the previous quarter.

The average amount of €283 is also down – from €305 a month in Q3 of 2009 and from €344 a month during the same period of 2008. Nevertheless it is estimated that the amount being saved now represents about 11 per cent of disposable income.

Also reflecting the poor economic situation is that 45 per cent of respondents – this percentage is rising from previous survey periods – said they expect they will have to dip into their savings this year.

The average for those reducing their debt is 25% (but seen from the above breakdown, is much higher among the 25-49 year old groups) and only six per cent will increase their debt.

Fully half of all respondents said they expect to also cut their spending this year with pensioners being least likely to do so at just 13 per cent.

The purpose that most people – circa 33 per cent – give for this level of savings is mainly to ensure that a ‘rainy day’ or emergency fund is in place to meet those unexpected expenses, or falls in income.

One small but welcome ray of hope for travel operators is that all age groups except the 25-to-34 year olds (16 per cent of all respondents – the highest percentage recorded in 15 months) said that they were saving for a holiday this year.

Meanwhile just four per cent on average said they are saving in order to buy a car and only six per cent were saving toward the purchase of a house.

The Postbank survey does not include the total amount of personal savings in the economy, but estimates as high as €180 billion have been suggested.

Some economists describe this savings rate as a form of hoarding that is damaging the economy.

They’re wrong of course. High savings are a typical reaction to recession that occur as a result of a serious banking crisis that’s been caused by the sudden withdrawal of excess credit and liquidity.

It’s also a natural reaction when a country is caught in a deflationary vortex (as is the United States and the UK) and people see asset prices falling; better, they reckon, to wait until prices hit bottom before they make their purchase.

What will stop the vicious circle isn’t consumers willingly buying at the higher price – that clearly is not in their interest – but in the return of confidence in the banking sector and the general economy, something we have clearly not yet achieved.

The danger for savers, is that the government, which is increasing the c€77 billion national debt by millions every day – you can watch the figure at www.financedublin.com/debtclock.php – will decide to raid our rainy day fund by sharply raising the DIRT tax from its current level of 25 per cent.

Think they won’t? DIRT was just 20 per cent at the beginning of 2009.

MoneyTimes readers can buy Jill’s latest TAB Guide to Money Pensions and Tax 2010 this month by ordering copies online at www.jillkerby.ie at a special reader’s price of just €10.

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