Why the English are More Frugal than Americans
Why the English are better at frugality than Americans
I have been reading personal finance blogs written by people on both sides of the Atlantic for a few years now. PF blogs are probably the best way to get an honest snapshot of how different people around the world manage their finances. There are many differences between the issues faced by PF bloggers in the UK and those in the US. For example, US PF bloggers have bigger problems when it comes to managing their healthcare costs – something that most UK bloggers don’t have to worry about.
What interests me most though, is what PF blogs written by Americans and the English reveal about different cultural attitudes towards money. When considered in light of the current worldwide economic downturn, these differences become more pronounced, particularly when it comes to embracing frugality as a means to weather the economic storm. In the US, PF blogs show a shift towards frugality as a short term solution, while in the UK, PF blogs seem to embrace the move toward frugality as a shift back to healthy money habits, after a (perhaps unwise) period of conspicuous consumption.
American Money Habits
The turn around in money habits in the US due to the recession has been fast and severe. Earlier this year it was reported that the average household savings in the US had jumped to almost 7% – the highest rate in over fifteen years; a very significant turnaround from the less than 1% average seen in recent years. Spending patterns have changed almost as dramatically as saving patterns. Recent figures released by Harris Poll give a quick snapshot of how much things have changed in the US among 18-32 year olds during the recession:
- 64% of people were purchasing more generic ‘own brand’ food brands
- 47% are bringing lunch from home instead of buying it
- 20% have stopped buying coffee in the morning
These changes show a change in attitudes towards saving and spending that are quite dramatic; and it will be interesting to see whether these habits are sustainable in the long term, or if Americans will eventually succumb to frugal fatigue and give up their new found thrift.
As Americans cut back on their spending, similar figures have been released on the British public’s changing spending habits, with 57% of adults altering their money habits in order to spend less and save more. People are cutting back on luxury goods and expensive vacations; but it’s the national attitude towards belt-tightening that seems to have the English out in front when it comes to which country is ‘better’ at being frugal in the long term.
Before the credit crunch kicked in, middle class England was already a fairly frugal place: it was an eco-warrior’s playground. People were growing vegetables, carrying their grocery shopping in re-usable shopping bags, driving hybrid cars or walking instead of driving, drinking tap water in restaurants, and falling over themselves to patronise their local farmers’ market. Of course, back before we got our collective arses kicked by the recession, this was all done in the name of the environment. It was desirable to be seen to have the resources to put the care of the environment ahead of one’s own immediate comfort. But that was exactly the point. It was a badge of honour: ‘It’s hard to grow my own vegetables, but by God don’t they taste better! (And doesn’t it allow me to feel morally superior to those who buy tomatoes from Waitrose flown in from Spain!)’
Now, as you can virtually hear the creaking of leather as belts are tightened across the country, all this eco-warrior living suddenly revealed the desirable side-effect of saving money. And for most people, the idea living more frugally is not that hard to swallow – especially when dressed up as frugality’s more sophisticated and better looking older sister: the idea of living a better, more simple life.
The English Psyche
The idea of living simply, and enjoying life though spending less is a way of life deeply ingrained in the English psyche. As many commentators have pointed out over the past two years – the English were never that great at conspicuous consumption to begin with. Unlike Americans who are brilliant at indulging themselves, extravagance is not a natural part of the British national temperament. Thanks to the decade of rationing following the Second World War, frugality and ‘making do’ became such a part of our national psyche that half a century later it is still inherent in our attitudes towards money and thrift.
One of my favourite columnists put it like so in an interview with the Chicago Tribune:
“Britain is always a bit prone to nostalgia, especially about the war years. There’s this kind of pride in being like your granny. As hard times hit, reusing tin foil, mending your own socks or turning down the thermostat feels positively virtuous.
“Puritanism is not really gone from Britain. It’s never very far below the surface. We were never easy with prosperity. In the United States you say, ‘I’ve got this because I’ve done well.’ In Britain, there’s this nagging feeling that perhaps we haven’t deserved it.
“If the American fantasy is about the opportunity for anyone to make it big with a bit of effort, the British fantasy is about making do, mending things and being morally superior to everyone else in the world.”
Money and Optimism
This trend towards prudence in the English explains why they are so well adept at long-term frugality. On the other hand, it could easily be said that the American attitude towards money is one of overwhelming optimism. Where the English think, ‘Save now so tomorrow won’t be any worse’, Americans think, ‘Save now and tomorrow can only be better’. American culture is wired for success and this seeps into their money habits; a period of self-imposed frugality will be grasped with both hands, because they innately believe that however hard things are right now, better times cannot be far away. So, they will make severe changes to their spending and saving habits because they expect the change to be short term.
A recent survey conducted by the Pew Charitable Trust in the US found that Americans are overwhelmingly optimistic about their near future prospects, with just under 8 in 10 believing it is still possible to ‘get ahead’ in the current economy. Meanwhile a similar poll taken in the UK by the Sutton Trust showed that when asked, less than 4 in 10 respondents believed their chances to thrive were unaffected by the economic down-turn.
The tendency towards pessimism in the English when it comes to money is not surprising when viewed as part of a national habit of caution. However, a dose of healthy American optimism might not go astray, especially when it comes to getting people spending again to kick-start the economy and following the US out of the recession.
What do you think? Do you think cultural attitudes affect the way people manage their money? And, do you think optimism/pessimism plays a part in frugal habits?