When being frugal might actually cause you to blow more dough

The term frugal has a special meaning for older Australians because they tend to be more prudent, economical and averse to waste that our younger counterparts.

But what if that frugality is somehow counterproductive and you could, to use that great English phrase, be ‘penny wise but pound foolish’?

Two separate surveys out this week suggest some people’s efforts to be frugal are misplaced as they haggle and chase savings over the small stuff and overlook the much bigger opportunities.

By background recent research from comparison site Mozo supports the popular conception that Gen X and Y are much more likely to fritter away funds on clothes and eating out than their parents.

In another survey just out Mozo found all of us are far more likely to haggle over whitegoods to save at best hundreds of bucks but meekly accept at face value the cost of financial services such as mortgages.

The irony of course is that negotiating a better rate on a home loan can be worth thousands of dollars over the life of the loan.

Likewise getting your insurances on the best premium through negotiations can add up over time to far more serious dollars than haggle-led peanuts off microwaves etc.

On the FiftyUp Club radio show on Tuesday you might have heard the boss of the Heritage Bank talking about their work with Sydney’s University of Technology into a similar phenomenon.

It found we are getting the message around shopping around for the low-hanging fruit of electronics, travel, groceries and clothes with 90% of us loving instant savings.

But when it came to home loans, where 19% who did switch saved $3000+ a year, only 67% said they’d shopped around for a better rate.

The reason given by the researchers was that many believe switching major financial instruments and investments is too time-consuming and too much trouble for the return.

In age terms there was no significant divide between the so-called tightwads and spendthrifts but men were more likely to be the former and women the later!

But those aged more than 66 are only prepared to ‘get out of bed’ if the savings through switching are far greater than would motivate those aged 18-24.

For example 40% of the oldies would only switch home loans if it was worth more than $3000 compared to 20% of the young’uns who’d happily switch for lesser savings.

Of course it may seem easier to haggle for a discount off a $800 fridge than a $350,000 mortgage but if the store or the bank want your business you should never accept their first price.