Why Do We Save? And Do 'They' Understand Normal People?

I happened upon this article in The Guardian this morning. The gist of the piece is the admittance by the Bank Of England that it is deliberately holding down interest rates at historically low levels in the hope that this will discourage people from building up cash savings. "Charlie Bean, who sits on the Bank's monetary policy committee that set the base interest rate, admitted it was being held down in the hope families would use their cash and thereby help reflate the economy."

One of the key things in the business of advertising is the continuous quest to genuinely understand peoples' real motivations for their behavior. How they buy, how they choose, or why they choose not to buy. You'd suspect that to be a successful monetary policy-maker, for who the spending pattern of the nation is more than just a passing interest, that would also be true.

But this article got me to thinking,  do these people really understand normal people at all?

Saving money isn't something that is either easy or particularly exciting to most people. There have been efforts to encourage people to save over the last few years that recognise this. Add to this that the rising costs of living have left an ever decreasing amount of disposable income makes saving a painful experience for most.

Most people I know save through necessity, to create a buffer against the unexpected (rainy day money), to prepare for their childrens' education, to build towards a big, painful purchase (mortgage deposits for example). Most regular people are not carefully putting away money each month because of the measly 4.2 per cent interest or whatever they were getting on their savings account. While this might not be the case for the highest earners, where the larger amounts they are saving plus the higher interest rates available return decent amounts, the interest garnered on the saving accounts of normal people are barely noticeable. It's hardly the motivation for putting away money.

And here we are, at a time when it seems almost everyone is feeling some effect of a pretty hard recession. Redundancies and business closures abound, belts are being tightened, budgets are being scrutinised. All spending is questioned, holidays are reigned in, big purchases are put off.

It seems incredible that these senior policy-makers imagine that a couple of percentage point of interest will be the thing that encourages normal people to take the money they were carefully, and often painfully, saving for their kids' education or in case they get made redundant, and dash out into the retail villages of Britain and blow it on a big-screen TV or a new lounge carpet.