We all know how important it is to save money. Whether to cover unexpected expenses, pay for a large purchase, build a bigger investment or simply as a rainy day fund, savings are an integral aspect of money management. But, often, saving money is easier said than done, especially in the current economic climate where inflation continues to rise.
However, there are a few simple ways that, when used together, can help you achieve your savings goals.
Pay off debt
If you have debt, particularly high interest loans, it’s important to pay this off before you start saving. Prioritise loans in order of which is costing you more and work your way down from there.
If you’re used to using credit cards, try not to rely on these for either everyday spending or for paying off loans as it’s easy for interest to mount up.
If you’re really struggling with debt, despite planning your monthly budget, you might want to consider getting professional advice from a debt charity.
Set up an emergency fund
An emergency fund can be helpful for a range of situations such as car repairs, boiler replacements, illness, redundancy or even vet bills. It’s usually advised to create an emergency savings fund of between three and six months of expenses.
Many people choose to create an emergency fund before starting to save for other, larger goals. This can help ensure you’re not left in a tricky situation if the worst happens. Once you’ve got your emergency fund set aside, you can build up a separate pot for non-essentials or luxuries.
Keep track of your finances
This might seem like simple advice but knowing exactly what comes into and leaves your account can help you build up a savings fund. Create a spreadsheet detailing your total monthly income, including wages and any benefits. Calculate your total outgoings, taking into account mortgage or rent, bills, childcare costs and any loan payments.
Once you know what you have leftover, allocate a portion as your discretionary spending fund which can include non-essential items and activities such as nights out, takeaways or activities. The rest can be set aside as savings.
This can also be a good exercise to show any areas where you might be able to cut back on your spending.
Set up a savings account
If you’re saving towards a large purchase or investment in the medium term, you might want to think about putting your money in savings account with a variable rate of interest. Some accounts have limited withdrawal allowances but they often offer better interest rates than easy-access options.
These can be especially useful for building up savings for a house deposit, car, luxury holiday or university fund.
Finally, remember that circumstances can change so you might have to be fluid with your objectives or readdress your budget depending on your situation. But as long as you’re either working to pay off your debt or putting a little aside each month, you’re one step closer to your savings goals.