To the question "how much should I save?", the answer today for Britain appears to be "a lot more". We believed New Labour in the mid-90s when it sang "things can only get better". The result was that we went out and spent, spent, spent and saved less than we had for a generation.
This profligacy had serious consequences. We became addicted to credit, throwing out notions of thrift. Our rock-bottom savings rates meant British banks, which did not have the same access to retail deposits as banks in other, more provident countries, borrowed on the volatile wholesale markets for their cash. Household savings fell, personal debt built up and, well, you know how that chapter ends.
But Britain's behaviour is now becoming more hair-shirted. The Office for National Statistics shows that in the first half of 2009 the impact of the recession meant people saved more – with household saving averaging 4.8%. This however is still some way off the historic average of 7.6%.
What does this mean for us as a nation? In the west there's a view that we should spend our money – even if we have to borrow to do so. But this is changing: the number of credit cards in Britain has fallen back to 61.5m from a peak of 67m in 2007.
Perhaps we should ask why we save? For a new car? To replace a kitchen? For our retirement? Because we find it difficult to envision a distant future or understand how much we want or need to consume, we take cues from our society. So the behaviour and views of others count. Politicians who promise simply a better future without explaining how much it will cost to get there, beware.
