Live for today and worry less about tomorrow is the new lifestyle financial trend that’s putting the “fun” back into savings funds.

The soft-saving finance trend has become particularly popular among Generation Z, offering a more relaxed approach to personal finance.

“The thinking behind ‘soft saving’ is that financial wellbeing isn’t just about building wealth, and is more about being able to enjoy your earnings now while maintaining a good financial balance,” explains Dan Browne, financial planner at Smith & Pinching.

But how does this work in practice? Here’s everything you need to know about this flexible financial strategy…

What is behind the popularity of the soft-saving finance trend?

“Typically soft savers are trying to strike a bit more of a balance between preparing for extra costs ahead – like holidays and car upgrades – but making sure they live a fulfilled life in the meantime,” says Browne.

“They don’t see the point of making huge sacrifices to save as much as possible.”

What are some key features?

“Soft saving is basically spending your money first on what you want and then saving whatever’s left,” explains the financial planner. “Some people are able to save a regular amount, but there’s no strict rule and it’s not necessarily the same amount every month.”

A key principle is that soft savers are still able to enjoy themselves.

“They still go on holidays and enjoy meals out with friends while being financially responsible,” says Browne.

How does it work in practice?

Soft savers tend to use a savings account that allows for a little bit of return while still being accessible.

“Typically a person would find a comfortable amount to set aside – say £200 a month – which is meaningful but is just a drop in the ocean for a housing deposit,” explains Browne.

“In a year’s time, those savings could add up to a nice holiday, car or designer clothes.”

How does it differ from other saving methods?

“There’s not normally an objective with soft saving, it’s more about putting away what you’ve got left – unlike traditional saving where you need to tighten your belt and cut back,” says the financial planner.

He adds: “Traditional savers also pay regular set amounts into a pension or ISA, and when they get bonuses from work for example, they also tend to put that money away for a rainy day.”

What generation is it popular with?

“The trend has become popular among younger adults, especially among Gen Z,” says Browne.

“It was instilled in them to save when they were growing up, so now they’re being responsible by saving without feeling that they’re 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 that has to be saved, and as a single person it’s even harder to reach,” adds Browne.

What factors have contributed to its popularity?

The financial planner highlights that there are two main reasons behind this trend’s growing popularity.

“Firstly, costs are so much greater at the moment. High mortgage rates, increased rental costs and food is so much more expensive,” says Browne. “For some those traditional milestones, such as house ownership, can feel much harder to achieve than they did in previous generations.

“Secondly, there’s a broader shift in attitudes towards money and work. Many younger people grew up during the pandemic and have a mindset that we don’t know what’s around the corner, so it’s important to make sure we’re living for today.”

What are the benefits?

“Soft savers are living for today and worrying less about tomorrow,” says Browne. “They’re 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.”

What are potential drawbacks?

The financial planner 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,” warns Browne.

He adds that this flexibility can often lead to inconsistency.

“The advantage of automating savings is that it makes it much harder to miss a contribution. If you have that money come out of your bank on payday, you’re effectively paying yourself,” says the financial planner.

Another drawback is 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. However, if you withdraw early, you’ll lose that,” says Browne.

Is there a better version of soft saving?

“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’re not making the most of your funds,” says Browne.