1. Set a budget
Spending a little bit of time upfront working out your current situation and choosing specific areas where you can save money could save you hundreds of pounds in the long run.
Consider keeping a household budget, which can help give you peace of mind about your spending and enable you to spot areas where you could make savings. The Money & Pensions Service Link opens in a new window has a handy budget planner to help you identify what you have coming in and going out each month. It gives you a detailed spending breakdown, showing you where your money goes and suggesting next steps tailored to your results.
2. Spend less money
Little expenses can quickly add up – that daily £2 flat white, for example, could cost you over £700 a year. But there is a flip side: by making a small change in behaviour, you’ll be able to save that money. And little amounts, saved frequently, quickly add up.
Even with essential purchases there are ways to get a better deal, so be sure to follow our tips and get into good financial habits:
- Shop around – if you have something specific in mind to buy, use a comparison website or free app to check you’re getting the best deal.
- Don’t impulse buy – think carefully before making a purchase, especially if it’s a big one. If you sleep on it, it may seem less appealing in the morning or you may be able to find it cheaper elsewhere.
- Beware of special offers – never buy something you don’t need just because it’s discounted – you’ll be spending extra money, rather than saving it.
Top tip: Gas, electricity, broadband, mobile phone and water take up a large chunk of most household budgets. But there are plenty of opportunities to easily save money on utility and other household costs. The money you save could be put towards something more exciting, like a family holiday.
3. Manage debts
If you’re concerned about paying back money you owe, don’t bury your head in the sand – instead, take control of your debts and put a plan in place.
4. Set a savings goal
You don’t need to ‘save big’ or give up the things you love in order to make saving worthwhile. Getting into the savings habit is much easier than you think, and a savings goal is a great way to focus on longer-term financial ambitions – people who set one typically save £500 a year more than those who don’t.
Here are our top tips on getting started with saving:
- Open a savings account – open a suitable savings account Link opens in a new window with your chosen bank or building society.
- Choose your account nickname – most accounts now allow you to label your account with a nickname, such as ‘Summer holiday’, which will help to keep you focussed.
- Set a goal – think carefully about how much you’d like to save, weighing up what you can afford to put away each month against how long you want to save for.
- Start saving – get going with adding to your savings account whenever you can, following your savings goal where possible.
Top tip: You could even set up a standing order each month, with the money being withdrawn just after pay day so you’re not tempted to spend it later in the month.
5. Encourage children to save
It’s never too early to start saving – research shows financial habits are learned from as young as seven years old.
Teaching your kids about money is one of the most important lessons you can give them, and there are lots of ways you can get your kids involved in learning about money Link opens in a new window and being money-confident.
6. Save on your mortgage
Making regular overpayments can be one of the most effective ways to save money on your mortgage. If your mortgage deal allows you to, overpaying your mortgage every month – even by a small amount – will help you to reduce the amount of interest you owe on the loan and pay off the total amount sooner, potentially giving you considerable savings over the longer term. As an example, on a £150,000 mortgage at 4.5% with 25 years remaining, overpaying by £50 every month will reduce the interest by over £11,000 and the repayment term by two and a half years.
Why not use this simple mortgage overpayments calculator Link opens in a new window to see how much you could save on your mortgage by making overpayments – it could be thousands!
7. Think about retirement
With the maximum basic State Pension being far less than the amount most people say they hope to retire on, it’s easy to see why experts recommend you save into a pension Link opens in a new window from a young age. And many people get into the habit of making monthly contributions to their pension, seeing their pension pot steadily increasing in value over time.
Pensions are a tax-efficient way to save because the Government tops up your contributions with tax relief – and with a workplace pension your employer will pay into the scheme too. Effectively this means your savings are likely to grow more rapidly.
8. Invest for the future
Once you’ve got any debts under control and begun to save regularly, you could consider whether investing Link opens in a new window could be right for you. Investing is when you buy an asset, such as a bond, a share in a company or units in a fund such as a unit trust, with the expectation that it will increase in value in the future and generate income through dividends.
Historically, investments have outperformed cash savings, which can have their value eroded over time by inflation – although of course the past is not a guide to the future and with investments you may get back less than you invest.