Fortunately, there are plenty of ways to boost any amount you can squirrel away, from maxing your interest rate to using tried and tested budgeting techniques. These can increase your chances of building your rainy-day savings pot and create better money habits to boot.
So, here are some top tips to boost your savings!
Track your expenses
Most of us are finding that soaring living costs are eating up any spare cash we might have set aside for savings. So why not spend some time working out where your money is going, and whether you could potentially save a little more. There are masses of budgeting tools to get started, and work out how you can save even a small amount.
There are also loads of apps that can help you to track your spending. For example, the Virgin Money Mobile banking app Link opens in a new window tags each transaction, making it easy to see where your money’s going. You’re also able to set a budget, and you’ll be notified if you’ve breached this. If you’re willing to put in more time, use one of the free online budgeting tools such as Moneyhelper’s Link opens in a new window.
Use a budgeting method
If you’re struggling to find spare cash to save for a rainy day, you can put yourself back in control by finding a budgeting strategy that suits you.
One popular option is the ‘pay yourself first’ method. This involves setting aside money for your financial goals as soon as you get paid. So, your money may go straight into a pot towards home improvements, say, or holidays. You could save 10% of your income, with 5% going into a rainy-day pot, for example, and 5% into a holiday fund.
Alternatively, try the simple 50/30/20 approach to saving money. This breaks down your spending into ‘needs’, ‘wants’ and ‘savings’. You set 50% aside for your essentials, 30% for your wants, such as hobbies or evenings out, and 20% for financial goals such as savings.
Andy Webb, an award-winning blogger and podcaster at Be Clever With Your Cash Link opens in a new window, says: “You can tinker with the percentages for these methods to suit you. The golden rule is finding a straightforward budgeting technique that enables you to meet your spending and saving goals.”
Max the interest you earn
After years of rock-bottom interest rates, savings accounts have made a big comeback. But despite plenty of great rates to choose from, it’s still important to get the most interest you can. Inflation remains high at 10.1%, so your money’s spending power is still shrinking over time.
For example, if you’ve saved £10,000 into an account that pays 0.25%, you’ll earn just £25 interest in a year. Move this money into an account paying 4%, and your interest rises to £400. It takes minutes to open a new account and move your money, and it’s worth doing for the additional interest – particularly this year, with plenty of great rates on offer. Check out Virgin Money’s wide suite of interest-paying products Link opens in a new window.
The easiest way to compare rates and find the best account for you is to use a comparison site. For example, websites such as Moneyfacts Link opens in a new window, Compare the Market Link opens in a new window and MoneySuperMarket Link opens in a new window will show you the top rates on offer. You can streamline your search to find the right type of account for you, whether that’s an easy-access, notice or fixed-rate account, for example.
Consider making use of your ISA allowance
You can save up to £20,000 in an ISA Link opens in a new window in the 2022/23 tax year. Saving into an ISA enables you to earn interest without any of your pot being subject to tax.
If you’re saving in cash, you have the same choices as you would with a standard savings account. You can choose an easy-access account, for example, or lock your money away in a fixed rate ISA to benefit from a higher rate.
Remember, though, that you can earn interest tax-free outside an ISA through your Personal Savings Allowance (PSA). This allows basic-rate taxpayers to take home up to £1,000 worth of savings interest tax-free each year, and £500 for higher-rate taxpayers.
Many savers will find the amount of interest they earn is protected from tax under the PSA, says Rachel Springall, finance expert at Moneyfacts. “However, rising interest rates could result in savers with larger pots breaching their individual allowance, which is why ISAs offer considerably more suitable longer-term tax-free benefits.”
Bear in mind, too, that you can shift some or all of your ISA money held elsewhere to a better account. You don’t have to leave your old ISA money in poor-paying accounts.
Regularly review your rate
Once you’ve maximised your savings, or if you’ve already done so, don’t just sit back and forget about your account. This is particularly important if you’ve chosen a variable rate savings account. Make a note in your diary to check that you’re still benefitting on a top rate on your savings every month or so.
Springall says: “Savers would be wise to compare the latest Cash ISA rates if they want to take advantage of their current ISA allowance, for example, as there are plenty of enticing deals."
“Those looking to move their older ISAs must be sure to review their rate, and transfer these to another ISA so they can retain their tax-free wrapper. Bear in mind, though, that not every provider will offer this option.”
If you’re moving money held in a cash ISA you’ll need to fill out a transfer form with your new ISA provider. But the process is still simple, and only takes a few minutes to get started.
Ultimately, it’s important to make the most of your spare cash, and find ways to boost the amount you have set aside, particularly during difficult times.
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