Saturday, 30 July 2011

Why I Save and Why You Should Too - Even if you aren't saving for anything.

I was asked recently why I bothered to save and invest and why it was so important to me.

Some people are saving for a specific one-off expenses like a wedding or new car. Others are saving for ongoing expenses like school fees or university funds. Others are focussing on retirement or on buying a plush pad somewhere hot and exotic.

The reasons why people save are as diverse as a bag of pick 'n' mix. Reasons depend on priorities and life stage, amongst other things

My reasons are somewhat less obvious but I will try to explain them as best I can.

I started taking an interest in 'playing the stockmarket' around twelve years ago. But that was more to do with enjoying the thrill of the game rather than any particular plan to build something of substance.

In 2003, I had an unexpected period of severe illness. At the time, I didn't know when or if I would recover. Receiving the letter that detailed that I would be going down to half pay within a couple of weeks and SSP (Statuatory Sick Pay) some weeks later.

In the grand scheme of things, this probably didn't even register on the 'Grand Scheme of Things' scale. However, for us, it was a defining moment of incomprehension, particularly as my other half had given up work to care for me. That one letter was like receiving a lightning bolt to the belly (I've never actually experienced a lightening bolt to the belly, but you can excuse that as dramatic license).

As it happens, I did get better but that letter left its mark. It still does.

Life, inevitably, will throw out some curve balls. If you don't get one thing, you'll get another.

For me, our portfolio and savings accounts provide a cushion against the effects of such a letter in the future. The cushion is, of course, in hard assets but it is also a psychological cushion.

In the future, another letter, or whatever else, may come but it gives me a sense of security to know that we have assets and also that I know how to build them.

I found a short essay on the website of Luther Setzer which perfectly sums it up for me. The link is posted below. It will resonate deeply with some people, particularly those who have encountered their own lightning bolts, and not scratch the surface of others.

Sometimes, when carrots don't work, a nice big stick does the job very nicely. Maybe that's one of the  reasons older people are more inclined to save: merely by the number of years they've been around, they're more likely to have experienced a ligthning bolt of some kind.

Admittedly, having a cushion is nice because of the things I could buy with it, if I wanted. But what I really appreciate about having a cushion is the choices that it allows me to make and the breathing space to consider my options.