When it comes to saving, there was always that handful of kids at school who smugly paid their pocket money into their building society every week while everyone elses got blown on sweets. If you never saw the point of saving, or you’ve got out of the habit over the years, don’t worry. It’s easy to get started! These are my tips on how to get into the routine of saving.
Tip 1: Don’t save if you’re paying off expensive debt
I don’t like to start with a reason not to save, but if you owe money on store cards, credit cards or high-interest loans, it’s much better to pay them off first and then begin saving. It will save you interest and you'll start with a clean slate.
Tip 2: Work out what you can save
Let’s face it, we don’t have to look too hard to find something more exciting to do with our money than saving. But don’t let that put you off.
The trick is to perform a bit of gentle psychological repositioning. Don’t focus on the fact you’re ‘saving’ or that you’ll have a bit less to spend each month. Instead look at what you’ll be able to do if you have some savings in the bank.
These steps will help you work out how much to save:
Step 1: Make a list of things you’d like to do if you had savings – maybe it’s going to a weekend festival, going on holiday, or a getting a deposit for a car – or just having cash for emergency expenses (Not so much fun, but they happen to the best of us). Think big! If you’ve got something in mind that you know you’ll love, it makes putting that money away so much easier.
Step 2: Put them in order of which you want to save for first.
Step 3: Do some research on how much you’ll need to save and, ideally, when you’d like the money by. A deadline can be a real motivator.
Once you know what you’re saving for, work out how much you can save each month. It’s still worth doing even if you think you can only afford to save a little. Look after the pennies and the pounds will take care of themselves, as everyone’s granny used to say.
Tip 3: Work out where you can make cutbacks
Be honest: there are probably things you’re buying that you could get for less (who doesn’t love a bargain?), or money you’re spending on treats that you can cut back on.
If you cut out a £2 coffee every day at work, for example, you could save almost £500 a year. And a blow-the-budget £3.50 drink daily would add up to £800 at the end of the year! Cutting that spending in half would free up £400 for your savings pot.
If you have no idea where your money goes, keep a spending diary (you can do this on your phone) or use a budgeting app. Just make a note of what you spend and what you buy and you’ll soon get a handle on your expenses.
Tip 4: Find an account that helps you to save
There’s no getting away from the fact that interest rates are low at the moment. But the main reason to start saving is to have some money when you need it.
It’s definitely a good idea to compare accounts, using price comparison sites, to see how much interest you could earn.
Some banks pay a good rate of interest on current accounts, if you’re in credit. This works well as a savings account as long as you’re disciplined but not if you spend money as soon as you have it!
Tip 5: Set up a standing order
A standing order lets you pay a set amount from your account regularly (normally every month). You can let it run for a fixed period of time, such as a year, or to last until you cancel it. Set it up so the money leaves your account just after you’ve been paid and you’ll be less likely to even notice it’s gone.
Tip 6: Switch to the best rate once you’ve saved £1,000
Shop around using price comparison sites once you’ve been saving for a year or have £1,000 in your account (whichever comes first). That’s when having an account paying the highest interest rate will start to make a difference.
So that’s that: you now know everything you need to become a regular saver. Give yourself a pat on the back (you can even let yourself feel a little smug..!)
Before making financial decisions always do research, or talk to a financial adviser. Views are those of our mentors and customers and do not constitute financial advice.