The man and woman in the street seem to know an awful lot more about this recession than their governments: they know that the only way to get yourself out of a financial hole is to stop digging.
Instead, the hole must be filled in – with savings – so that you can eventually, genuinely, afford the things you want to buy.
A prudent savings regime will even allow you to borrow again, for the really big ticket items, like a home, which cannot realistically be purchased with savings that have already been ravaged by the tax-man.
In the first quarterly Savings Index survey from Postbank, the banking arm of An Post, found that 75 per cent of respondents are saving some money, however modest the sum.
Over the next three months, 54 per cent of existing savers said that they intend to maintain their level of savings while 21 per cent of respondents intend to save even more. Only 17 per cent say they are likely to reduce their savings in the next three months.
Meanwhile, two thirds of all savers are still doing so within their original SSIA range of €254, a good thing too given that our debt to disposable income ratio, at circa 180 per cent, is the highest in Europe and even higher than in debt-laden America and Britain.
Too bad then that our Government and all the other governments and central banks that are doing everything possible – like lowering interest rates below the rate of inflation – to discourage us from cleaning up our personal balance sheets by paying down our debts.
As this Postbank survey shows, there is no shortage of common sense amongst the public: three quarters of respondents, back in the second and third weeks of December, admitted that they “are looking to preserve or increase their savings amounts and more than 40 per cent say specifically that they are saving for their emergency fund”.
The ‘emergency’ or ‘contingency’ savings fund is something this column has always promoted and should amount to at least three to six months worth of your net, after tax, income.
Meanwhile one third of respondents say they are saving up to €100 a month, while a further 30 per cent are saving between €100 and €250. Just five per cent are putting away over €1,000.
Not surprisingly, the biggest group of non-savers are the 18 to 24-year-olds and pensioners, neither group of which generate much or any surplus income.
Interestingly, the one group that have been regularly vilified in the recent past as the most profligate – the 25 to 34 years olds – are now identified as the biggest single group of savers (83 per cent).
Aside from that ‘rainy day’ purpose (with 42 per cent response), Postbank say that people are saving for holidays (15 per cent), retirement (nine per cent), a home loan or mortgage (eight per cent), education (seven per cent) and just two per cent for home improvements.
Weddings are the source of just one per cent of savings and 14 per cent are saving for ‘other’ unidentified purposes.
The low level of mortgage savings shouldn’t come as much of a surprise; mortgages are purchased when people are confident that their jobs are secure and prices are not just affordable but stable, or rising. None of those factors are at play at the moment.
Nevertheless, Postbank officials last week said they’re proceeding with their plans to introduce a mortgage product later this year.
And what are Irish savers expected to cut back on in 2009, if at all, according to this survey? First, lunches (41 per cent) followed by holidays (35 per cent) and fashion purchases (34 per cent).
This is followed by coffee and alcohol (31 per cent), beauty products and treatments (28 per cent) and visits to the cinema (21 per cent), which is pretty good news for the sellers of smaller treats, but doesn’t sound too hopeful for the beleaguered restaurant trade, the holiday industry or high street shops.
Again, it will be very interesting to see how these figures adjust next April, when the impact of Government cutbacks and higher unemployment figures take effect.
Finally, this first ever national savings survey also asked people about their level of confidence in the banking system.
Some 43 per cent of respondents noted that the security of their funds was even more important than the interest rate on offer (31 per cent) while 28 per cent said that access to their money was their priority.
I expect that that 43 per cent figure will be even higher when the next survey comes out.
The banking crisis here is far from over and Postbank is now in the enviable position of not only being the official banking arm of AnPost, one of few financial institutions to maintain its financial integrity, but one of very few banks (RaboDirect being another) that is not burdened with catastrophic levels of property-related bad debts.
Next week: What savings accounts deliver the best interest rates AND meaningful security?