The soft-saving finance trend has become particularly popular among Generation Z, offering a more relaxed approach to personal finance. The strategy prioritises enjoying earnings now while maintaining a good financial balance, rather than focusing solely on building wealth.
What is behind the popularity of the soft-saving finance trend?
Dan Browne, financial planner at Smith & Pinching, says soft savers typically try to strike a balance between preparing for extra costs ahead, such as holidays and car upgrades, while making sure they live a fulfilled life in the meantime. He adds that they do not see the point of making huge sacrifices to save as much as possible.
Key features and how it works in practice
Browne explains that soft saving is basically spending money first on what you want and then saving whatever is left. Some people are able to save a regular amount, but there is no strict rule and it is not necessarily the same amount every month. A key principle is that soft savers are still able to enjoy themselves, going on holidays and enjoying meals out with friends while being financially responsible.
Soft savers tend to use a savings account that allows for a little bit of return while still being accessible. Browne gives an example of finding a comfortable amount to set aside, such as £200 a month, which is meaningful but just a drop in the ocean for a housing deposit. In a year's time, those savings could add up to a nice holiday, car or designer clothes.
How it differs from other saving methods
Unlike traditional saving, where you need to tighten your belt and cut back, soft saving has no objective and is more about putting away what you have got left. Traditional savers pay regular set amounts into a pension or ISA, and when they get bonuses from work, they tend to put that money away for a rainy day.
Popularity and contributing factors
The trend has become popular among younger adults, especially Gen Z. Browne says it was instilled in them to save when they were growing up, so now they are being responsible by saving without feeling that they are putting their lives on hold while working towards something that feels unobtainable. Depending on where you live in the UK, typical house prices are still rising, and while there are mortgages that allow for very small deposits, the majority of people still need at least 5%. This is a sizeable amount of money to save, and as a single person it is even harder to reach.
Browne highlights two main reasons behind the trend's growing popularity. Firstly, costs are so much greater at the moment, with high mortgage rates, increased rental costs and more expensive food. For some, traditional milestones such as house ownership can feel much harder to achieve than they did in previous generations. Secondly, there is a broader shift in attitudes towards money and work. Many younger people grew up during the pandemic and have a mindset that we do not know what is around the corner, so it is important to make sure we are living for today.
Benefits and potential drawbacks
Soft savers are living for today and worrying less about tomorrow, says Browne. They are the pandemic generation and know how quickly things can go horribly wrong, so they want to spend their money on important life events and on having incredible travel experiences.
However, Browne warns that soft saving can become a justification for overspending, and can also leave people unprepared. Soft savers are not accumulating wealth for tomorrow, such as towards building a house deposit and creating emergency funds. He adds that this flexibility can often lead to inconsistency, whereas automating savings makes it much harder to miss a contribution. Another drawback is that having instant access to savings means you will lose interest on your savings. Some high street banks are offering up to 8%, which typically requires you to put your money away for 12 months, but if you withdraw early, you will lose that.
Is there a better version of soft saving?
Browne suggests that any saving is a good habit, but a healthier version of it will include making regular savings for an emergency fund, as well as retirement provision, even if you are not making the most of your funds.
