Tips for saving for the future
Most of us could do with saving more money to protect our future; in fact, many of us currently don’t save at all. With our short-term approach to finance, we’re looking at pretty bleak futures. Thankfully, it’s not all doom and gloom. It’s never too late to start a savings plan, so use our top tips to help you get started, and put them into practice today!
Set realistic goals
You’ll never save properly if you don’t have targets to aim for. The first thing you should do is set yourself a SMART goal; that’s Smart, Measurable, Achievable, Relevant and Time-Bound. Setting a high savings goal to start with is a recipe for failure and that will be demotivating.
Instead, set yourself a modest goal, with a deadline, that you know you can achieve on your current income. Give yourself a purpose, whether that’s home improvement, a holiday, electronics equipment; anything that has a substantial and tangible reward at the end.
Do your homework
Savings accounts vary wildly in terms of the interest rates they offer, so it pays to shop around. Start with your current bank first and find out what they offer. Savings accounts are usually built around the following factors: interest rates, fees and minimum balances. You’ll get higher APRs for those accounts that require a higher minimum balance, and usually higher penalties for early withdrawal.
To start, you’ll probably want a flexible savings account, something that you can pay modest sums into with any penalties for withdrawal, on the understanding that you don’t expect these savings to grow. However, once you’ve got into the habit of saving, you should start looking for an account with a higher yield.
Saving is about self-discipline and control and that’s something you’re going to have to teach yourself. Give yourself a break in the early days by automating everything. Set up a recurring payment from your current account to your savings account, to come out on payday. That way it will simply transfer over and you’ll know exactly what you have left to spend.
Just make sure that it’s a comfortable amount you’re saving each month that leaves you with plenty to pay your bills, household costs and get through the rest of the month.
What about emergencies?
There’s a sure-fire way to demotivate you when you start saving and that’s when you come up against your first emergency. Whether it’s a car breakdown or boiler repair, if you need to use up your savings to pay for this, you’re going to feel like all your hard work has gone to waste.
That’s why it’s important to set aside a different savings account specifically for emergencies. While you continue to save for the long-term, top up the emergency account until you’ve got at least £1000 sitting in there. Do not touch these funds unless you have an emergency. If you do, focus on topping that account back up before returning to your normal savings plan.
Set yourself a realistic budget
If you’re to comfortably save, and if you want to increase the amount you save over time, you need to know how much you’re spending now, and where you can make reductions.
That means it’s time to create a budget. Categorise your spending and track every expense. Once you can see what you’re spending and where, you can start to make cutbacks, particularly on frivolous or unnecessary expenses.
Maybe there’s a cheaper mode of public transport to get you to work, perhaps you could cut out the morning coffee or newspaper; you’ll soon find there are lots of little ways you can cut back on your expenditure.
As you do so, you’ll find that you have more left in the bank each month. Don’t just use this to treat yourself to something larger, stick it straight into the savings account and consider increasing your recurring payment.
Stay on top of it
If you want to stay on track and bed these new saving behaviours in, you should check your progress regularly. One good idea is to set a date each month, just before payday is best, to check how you did for that month. If you find that you didn’t do as well as you’d hoped with your savings, or you overspent in one area, don’t punish yourself; just realign your goals for the following month!