Saving

Saving is not something you do. It's something that happens to you as a consequence of how you live.

What is 'Saving'?

'Saving' happens when your income exceeds your expenditure. So it's a consequence of three sets of decisions:

• your lifestyle choices, which set your spending levels,
• your work habits and career choices, which set your earned income, and
• your past saving and investment decisions, which set your investment income.

The consequence of saving is 'savings'. This may not be the definition you expected. The savings industry uses the term differently, to describe the act of putting your money into bank and deposit accounts. The term 'investment' is reserved for putting your money into places where either the return of capital or the amount of periodic payments (interest/dividends) is uncertain. This distinction is convenient for the industry in classifying the products and services it offers. But it's not convenient for you, who should be thinking about both activities in exactly the same way - as you will see.

We reserve the term 'investment' for the process of deciding what to do with your savings. That means 'savings' as defined in the previous paragraph. 90% of financial advice concentrates on investment, because that's the fun part (and the part that makes money for the financial services industry). We think that 90% of your concentration should be on saving - the process by which you take in more than you give out.

We are not able to give you any advice on this: it's a personal matter. But we have something to say on the final page of this module - its position reflecting its importance. Don't go there yet....