Written by Emiley Phillips
Image by @beyonce
Savings saving savings…something we all wish we had more of but find it hard to make (and keep)! Isn’t it just so tempting to treat yourself, go out, buy something in the moment…we all fall down the trap. According to research, 41% of Brits today do not have enough to live for a month without income! Shocking, right?
Well, at IALH, we know how important it is to save and have seen from real-life experience how it works. So, get ready to make your notes…time to learn how to make the best of your savings – for your own benefit.
Start young and make it regular
The younger you start saving, the more you can save! The more regularly you add to your pot, the better. Think about it. If you save just £200 every month for 3 years, that will be over £7,000 put aside after that period. Whereas if you save just £200 every quarter, that would only be £2400 after three years – so in the long run, being regular and extending the period works best.
Try to set a realistic goal in your head each month to put x amount aside. Of course, you can increase or reduce this amount as and when required, but having an estimate in your head helps, especially with monthly budgeting. Follow the rule of paying yourself before you pay your bills!
Open a savings account
Now, it is all well and good having money set aside, but what are you going to do with it? Leaving it amongst your current daily funds and income will become jumbled, and it will be less likely to end up as a saving.
Opening a savings account is highly recommended. It allows separation of funds, and also, if you choose well, you can even earn interest = more savings!!
Not sure what account to open. Here we can help.
Stick with instant-access savings account if you need emergency savings for a rainy day. Though the interest will be lower, it can be accessed immediately.
If you are not too worried about instant access to your savings, perhaps you have quite a bit behind you – then a fixed-term account may be better. After all, the longer you lock away the cash, the higher the interest rate for reward.
Always use comparatives to find the best savings provider. Look at loyalty rates and see if local offers are out there – some regional banks and building societies can offer higher rates than more significant nationwide providers.
On the other hand…a savings account is excellent but if you can earn a more competitive interest by keeping your ‘savings’ in your current account, let it be. It usually works for smaller balances, so do factor this in.
Make the most of Government boosts
Did you know that the Government can help out, depending on the type of savings account chosen?
If you open a lifetime ISA (for those aged 18 and 39), you can save up to £4,000 a year until reaching the age of 50, and the Government will pay a 25% bonus of up to £1,000 each year! Note – there are penalties for withdrawing the money depending on the circumstance.
For those on a lower income, you can participate in the help to save scheme whereby the Government will add 50p for every £1 you save during the four years after opening the account. This account has a specific eligibility criterion, so it is not available for all, but go for it if you do meet the criteria!
Have a private pension
One way to make the best of your savings is to think about the future. Start saving money for your retirement by setting up a private pension. Each month, a small amount is saved (or lump sums if preferred) with a pension provider, and on top of that, you can get tax relief! This money will be locked away until you reach 55 years of age and then you can choose how to access funds from it.
There are various pensions you can enter. Check with your employer, as there are workplace pensions which means your employer will pay a small contribution too. Every little help!
Put your savings into low-risk investments
Of course, it depends on how risk-averse you are, but if you are willing to take a risk, then the outcome can be favourable.
Some popular choices are putting your money into stocks and shares, or corporate bonds. If you choose the right time and amount, it may take some time, but the rewards can be life-changing. This approach is particularly attractive at the moment when interest rates are historically low.
Have an end goal
It is all well and good to save, but make sure you know what you are saving for. This will keep you focused and motivated. Set some saving pots, i.e. one for a house, your child’s first car, starting up a business…whatever it may be. Otherwise, you can save up the pounds but have unguided direction. Giving value to what you are working for, a purpose certainly helps keep you on track and let the pots grow with some excitement. That way, you can review your outgoings each month, review and see, was it worth it? Could you do better next month? Think about the loss of the goal as a consequence.
So, these are just a few ways you can make the most of your savings. Most importantly, start now. There is no time like the present. When you get your next paycheck, think sensibly, can you put some money aside? Make it a habit; you will thank us later – and certainly in years to come when you may need it!
*This content is only for informational purposes and does not constitute any financial or legal advice*