How to Save Money – 3 Tips (Personal Finance)

Different people save for different reasons. It could be for an emergency fund, for retirement, or a mortgage deposit. Whatever the reason, having some savings aside will ultimately benefit you in the future.

Regardless of your current financial situation, you can always start saving little by little, so that you develop the habit of saving money. Besides, the same principles apply, whether you are earning a minimum wage or far above that.

The tips below on how to save money, can help you develop a simple and realistic strategy.

Find ways to cut your spending

Figuring out how to cut spending isn’t as easy as it sounds, as you may not currently realise where you are overspending. However, there are ways to reduce your expenses, as long as you take the time to look into your finances.

Here are some ideas on reducing your expenses:

• Cancel subscriptions and memberships you don’t use. Most of these would renew automatically and they could easily go unnoticed.

• Unsubscribe from newsletters and catalogues. Receiving special promo codes could seem appealing, but the reality is, they only make you more inclined to buy something, even when you don’t necessarily need it.

• Stop impulse buying by using the technique of “cooling off”. Forcing yourself to delay a purchase is another way to ensure you are not spending needlessly. Try taking a 24-hour period (or longer) to think about any purchase over, say £100.

• Plan more free activities. There are plenty of free ways to have a good time. You could use resources like community event listings to find free events. This could significantly reduce your spending on entertainment.

Set savings goals

One of the best ways to save money is to set a goal. Take a moment to think of what you might want to save for. Perhaps it is a dream holiday, retirement, mortgage deposit or a new car. Once you have a goal, it will be easier to remain motivated and stick to your savings’ targets.

• Short-term (1-3 years)

This could be for an “Emergency Fund”, which is essentially 4-9 months of living expenses. This intends to provide a peace of mind that in the case of any unfortunate event (like losing your job or being off sick) you would still be able to cover your living expenses, while unable to work.

Also, this could include planning a holiday to a dream destination. This is something that should keep you motivated to save and might be a good starting point.

• Long-term (4+ years)

Consider some of your long-term plans like a mortgage deposit or retirement fund. Both are important and require some serious planning ahead. Ultimately, the earlier you start saving towards these, the better. Even if it is a small contribution per month initially.

Choose the most suitable way to save

For your Short-term goals, consider:

• Additional bank account

Simply having a specific “pot” for your savings, which is separate from your current account could help you distinguish the two. This will also make it clearer to see how much you have saved, and how much you have left to spend at any time.

• Regular Savings Account

You could research what different banks’ terms are and choose one that suits you best. These could pay high interest rates but are normally limited to a small amount of money.

For your Long-term goals, consider:

• Tax-Free Savings Plan

These let you save a small amount every week/month, and will then provide you with a tax-free lump sum at the end of the term. If you are interested in taking one out, you could find more information about our Tax-Free Savings Plan here.

• Stocks & Shares ISA

An ISA allows you to invest your money in a range of assets, such as stocks and shares, bonds and commercial properties. It aims to give you a fair return on your investment and is also tax-free, within the limits set by the Government. If you are interested, you could find more information about our ESG World Friendly Stocks & Shares ISA here.

Lastly, try reviewing your budget and checking your progress every month. This could help you stick to your individual savings’ goals. What is more, it could also inspire you to find new ways to save and get to your goals even faster.