Spend some and save some

My grandmother was no financial wizard. So her advice about saving money was plain and simple, "Spend some and save some."

Fortunately, I got the message.

According to a recent survey by online banking business HSBC Direct, people who are longtime active savers are enduring this economic downturn virtually unscathed.

Nearly half, or 46 percent, of them said they remain comfortable with their financial situation and have not had to cut back on spending, eating out or making large purchases. By contrast, 37 percent of non-active or periodic savers said they had to scale back on living expenses.

This survey offers some important lessons for people who have poor or inconsistent saving habits. The main one is that it's going to take more than an economic crisis to get people to permanently change their spending and savings practices.

Most of 1,000 consumers surveyed, 85 percent, were willing to save more and spend less in order to get through this current recession.

However, 76 percent of people believe that once the economic situation improves, everyone is going to return to their old ways.

"It's difficult to change," said Kevin Martin, executive vice president of Personal Financial Services, HSBC Bank.

In fact, the survey revealed that most active savers started saving at a young age. Seventy-three percent of savers said their parents instilled the value of saving.

However, Martin says that consumer shouldn't worry if they didn't learn to save early.

"Our research shows that you can start saving money at any time," Martin said. "You just need to move to a savings mentality. You can't look at saving as a luxury. You should see it as an obligation."

To learn more about the differences between people who save regularly and those who don't the survey took a closer look at the mindset of both groups.

One key distinction is how active savers view saving, compared to other savers. For them, saving is an ongoing process and not just a means to an end. They tend to save for the sake of saving, while periodic savers are more likely to save money for a big purchase. For example, 18 percent of regular savers versus 30 percent of other savers say they regularly put money aside for a vacation.

Most active savers say they save because it offers an "added sense of security" in their daily lives, rather than out of fear of an unforeseen incident.

Nearly 60 percent of active savers with direct deposits put more than 10 percent of their income into retirement or other saving accounts. And when they get a windfall, such as a bonus or cash gift, 64 percent set aside more than 25 percent for savings.

Both groups ranked retirement as the number one reason to save. But active savers felt more strongly about it with 77 percent listing retirement first verses 65 percent of other savers.

Martin believes that banks and other financial institutions should step up their savings promotions to help consumers stay on the savings track. "We have an opportunity and responsibility to accelerate some of these lessons."

Indeed many banks have made saving easier. Some, such as HBCS, require no minimum amount to open an account. So if you only have $10 to start your savings plan, that's fine.

Other banks will set up automatic withdrawals from your checking account. These are great because after several withdrawals people tend to quickly adjust to living on less of their monthly income. In the meantime, the savings are piling up.

So for the people who started saving because of the economy, the lesson is clear. Don't stop saving when things start to turn around. Make saving a way of life. Not only will you fair better during hard times, you will also be able to reap the benefits of low prices and discounts offered during those times.

Keep in mind that it doesn't require a lot of upfront research to start a savings program. Just find the highest interest-bearing savings account with terms you can live with. And remember to spend some, but save the rest.

Vicki Lee Parker is a personal finance columnist in Raleigh, N.C. She can be reached at vickileeparker@gmail.com or (919) 877-5719.

(c) 2009, McClatchy-Tribune Information Services.