Most of us have this voice at the back of our minds telling us that we should be saving money. But as we often equate saving money with deprivation, i.e. we think of all the things that we will miss out on if money has to be diverted from spending to saving, we try to ignore that voice and carry on being bad at saving.
Being good at saving
I believe that there are two ways to help you to be good at saving.
Firstly, you need to have goals for your saving e.g. buying a property or retiring early, versus a vague feeling that you should be saving. Having that goal will make you feel more motivated to save.
Secondly, you should categorise saving as an essential part of your household spending, as opposed to being discretionary. Then you can accept saving in the way that you would accept paying your Council Tax or fuel bill. You set up a monthly payment from your current account and then forget about it.
If you automate your savings in the same way, then you won’t have the monthly dilemma of how much you should save. In a flexible savings scenario, it’s all too easy to say something along the lines of ‘I’ll just treat myself to that new jacket this month, but I will save more next month to compensate’.
Earning on your savings
You can earn a competitive rate of interest on regular savings accounts. Some of these accounts are only available to existing customers e.g. the Nationwide Flexclusive Regular Saver paying a variable rate of 5%. There are also open-to-all accounts, such as the Virgin Money Regular E-Saver, which pays a variable rate of 2.25%.
As well as savings accounts, you could also consider a high interest current account. There are some fantastic deals around at the moment, and great opportunities to earn money on your regular income. The Santander 123 Current Account pays 3% cashback on utility bills paid by direct debit and 1.5% interest on all savings up to the amount of £20,000.
Another way to automate savings, and attract tax relief, is to pay as much as you can afford into a pension. You receive tax relief on pension payments of up to 100% of your earnings (to a maximum of £40,000 in the current tax year). But the earliest that you can access your pension pot is currently at the age of 55. That’s a good thing, in that you are not tempted to take cash out. However, it could be frustrating if you find yourself in need of some cash, but you are too young to access money sitting in your pension pot.
Be savvy with your spends
I would recommend that you set aside a small portion of your income for leisure. This allows you to feel that you can still have some fun while saving. If you are planning to eat out, look for discount vouchers and codes. Snap up special offers at off-peak times in restaurants. When organising your holiday use a price comparison site to find the lowest prices; hotel rooms vary so much in price between different travel sites, you could save a couple of hundred pounds for a few days at the same hotel just by shopping around.
You could even motivate yourself to spend more time researching the best deals for household expenses such as home or car insurance and utility bills on price comparison sites. If you succeed in lowering any of these household bills, you could split any money saved between your leisure budget and your savings pot as a reward to yourself.
Other saving hacks
Two other pain-free ways to save money are:
- Use a cashback credit card. Use your credit card to pay for as much as you can, as long as there is no additional fee to pay by credit card. Make sure that you set up a direct debit to pay off the full balance every month, and that the credit card doesn’t have a monthly fee just to have it, though!
- Shop through cashback sites. Many purchases can be made through cashback sites such as Quidco and TopCashback. The cashback amount varies from 1% on eBay purchases to 14% on hotel bookings, but be careful you only make purchases that you were planning to make anyway. Find the lowest price for the product and service before making the purchase. Cashback is never guaranteed – look on it as bonus and don’t base your whole purchase decision on it.
If you adopt a new mindset toward saving, in combination with setting up methods to automate saving, then you can become good at saving!
