If you want to put some money away and start saving, here are 10 ways to learn how to boost savings and transform your financial life.
The economy may have been picking up in recent years (pre-COVID), but salaries have not been increasing by that much, and certainly not enough to reflect increasing living costs.
But while you may not be able to save a lot, it is worth saving what you can. Indeed, the best way for savings to increase is to simply start small and save regularly.
Although you may want to build up a lot of money quickly, there's little point trying to save £1,000 a month when you can actually only afford to put away £100.
And saving £100 a month is far better than saving nothing at all.
You may not care that much about saving money, which is why specific, realistic goals are important. Are you saving up to buy a house? Pay for a holiday? Get ready for Christmas?
It's easier to set money aside when you know exactly why you're doing it. Saving for the sake of saving can feel pointless.
Now you know why you're saving, you need to decide the best place to save money and start earning interest on it.
Because of the low Bank of England base rate, savings interest rates are also very low.
Most instant access savings accounts currently pay less than 0.5%, but some do pay more, usually those which require you to lock your money away for a short period.
Even the very best savings accounts only pay around 1.5% interest. And these are usually fixed rate savings accounts, where you have to lock your money away for a set period.
Some savings accounts linked to current accounts pay as much as 3% interest and can be the best way to save money in a bank. These often have a maximum deposit amount, so you may have to spread your savings across a few accounts.
Take advantage of the power of compound interest where you can. This is when you earn interest on your interest because it's added to your savings as you go along.
Look for an account that indicates that interest compounds daily rather than monthly. That way, you’re earning the highest amount of interest.
The key to understanding how to increase savings is having the right mindset. Unfortunately, the messages we receive often drive us to spend more and live beyond our means.
Try to become more aware of how you spend and what you spend your money on. Open Banking apps are useful for this because they show us where we can cut back.
Here are a few ways to help you spend smarter:
Always check to see if there is a cheaper alternative before you buy something
Make a list before you go to the supermarket and stick to it
Avoid impulse buying (checkout areas are notoriously bad for encouraging impulse purchases)
Try to use debit over credit cards, so you only spend what you have in the bank
Stay away from any kind of payday lending because of the high interest charges
You do not miss what you never had. Set up a direct debit from your current account into a savings account as soon as you're paid, and you will not miss it.
Some people find the best way to save is by using a regular saver account, where you pay in a set sum each month by direct debit. With some regular saver accounts paying up to 3%AER at the moment, this can be a good way to steadily build up a healthy nest egg.
It works in a similar way to your pension, which comes straight out of your pay packet. The only difference is that your pension is paid on your gross salary, whereas you'd be setting up a savings direct debit on your net salary.
You cannot access your pension until you retire. This means it should be an additional pot of money to your savings, not a substitute.
This may sound a bit extreme, but if you do not know what you spend your money on, it's very hard to know how much you can save.
Unsurprisingly, there's an app for that. In fact, there are lots of apps for that. Some app-only banks like Monzo and Starling even categorise your spending into groceries, eating out and shopping etc.
If you notice that you're spending a lot on eating out, for example, you could consider making packed lunches or cooking at home more. Remember step 4 and think like a saver!
Some accounts let you round up your spending to the nearest pound and save the difference.
For example, if something costs £1.89, it's rounded up to £2, and 11p is put into a separate account. You do not really miss the 11p and over time, you can save up a decent amount of money.
Just got a bonus or a money gift? It could be the extra boost you need for your savings.
Or, you could put it towards paying off any debts you have. Debts often charge higher interest than you'd earn on your savings, so it is essential to pay expensive debts off first.
Plus, paying off a loan more quickly could help you improve your credit score.
While some of us may have no problem with saving, others might need a little help from someone else.
Ask a family member or friend to help you stick to your spending plan.
It needs to be someone who can check in with you regularly to keep you from spending money unnecessarily, but also someone who you feel comfortable opening up to.
Check in with yourself (or your accountability partner) to see how well you’re sticking to your budget. If you can, try to do this at least once a week.
Look at where you're slipping up most often and come up with solutions. If you’re making progress toward achieving your goals, it might be worth rewarding yourself.
‘No’ is a powerful word. If you’re tempted to spend more money than you should, walk away.
On spending money, Oprah Winfrey advises: "If you don't love it, don't buy it." But if you can’t afford it, or you can find it cheaper elsewhere, there’s also no point in buying it.
There’s nothing wrong with treating yourself, enjoying life or going out with friends. You do not want to become a victim of your own savings plan.
But turning down invitations every once in a while, limiting the number of times a month you go to brunch, and even choosing not to buy that latte will all help to boost your savings and pay off in the long run.