In this day and age, many of us do not have savings behind us and that is quite a scary thought. What happens if you have an emergency, or get an expected bill? Savings in general allow you to live life a little more comfortably and mean that you can afford luxuries from time to time. Even if you don’t have huge amounts of money coming in, you can still put some savings away and these will soon mount up. The following guide will tell you exactly how you to save money, so that you can reach your goal whatever that may be.
Figure out your goal
Before you get started on saving, having a goal in mind will help you to achieve it. You might want to think about having a couple of separate pots, or saving accounts. One could be for a long term goal like a mortgage and the other could be an emergency fund. Ah yes, an emergency fund – something that EVERYBODY needs but not many people actually have. To avoid getting in debt (or more in debt, however the case may be) an emergency fund is essential for those things that crop up, that you haven’t budgeted for.
Another thing you need to do before you start the saving, is to work out how much you can afford to save. Many people choose to save 10% of what they bring in, but you might want to save less or more based on what you can afford. So work out all the money that comes into your house and all the money that goes out. Allow yourself a little leeway and then any money leftover, can be put into your savings accounts. Unless a REAL emergency crops up, you should not dip into your savings. Please note that a new pair of jeans or a manicure is NOT an emergency. You need to be a little tough on yourself and resist temptation but be rest assured, that the results will be worth it.
Where to save your money
If you are not up to scratch on everything financial, then you might be a little concerned as to where to save your money. With all the different bank accounts that exist, opening one especially designed for savings is advised, as they usually have the best interests rates.
ISA – Most people who are big savers opt to put their money into cash ISA’s (the maximum savings being allowed each year are £5,940.) This is a nice sum of money but if you have more to save than this, then you can obviously spread your money around some other bank accounts.
Stocks and shares ISA – If you don’t go for the regular ISA, you might want to have a little gamble and put your money into a stocks and shares ISA. The maximum allowed per year on these is £11,800. You could get more for your money on the stocks and shares ISA but you could also lose money, so you need to be aware of this.
You can mix and match the two accounts mentioned, if you do not fill the £5940 on the regular ISA and want to put some into stocks and shares. Another form of saving is soon approaching us in the form of a NISA and this has a nice limit of £15,000, to which can be saved in a regular ISA, stocks and shares or a mixture of both. I am of the firm belief that it is never too early to start saving and those who are under 18 can put their money on Junior ISA’s and they even receive a government contribution to this fund!
All banks offer a standard savings account and these are also great options as they usually offer an interest rate that is worth it. There is no limit to how much money you can save in these type of accounts, so you can use them in addition to, or instead of an ISA – the choice is purely up to you.
It’s a good idea to do some sort of price comparison/research online to find the best savings account. Things to look out for are the interest paid to you, the higher the better and the bigger return you will get for your money.
Time to start saving
Now that you know the low down, it’s time to put your money (however small that may be) into savings. Setting up a direct debit into your chosen savings account monthly might be a good idea. Many people choose to move their money over on “payday”, so this way you hardly notice the money is missing, which means that you are less likely to dip into it.
Let that money grow
Every now and again, you might want to look at the balance of your current account – just to see your money grow. It is an addictive feeling and leaving your money exactly where it is (and adding to it when you can) means that it will soon build up. Make sure that you are getting the interest advertised by whatever bank you choose and make sure you don’t go over your yearly ISA limit, as you will then be taxed. Many banks offer you great rates to begin with before drastically dropping the rates, don’t be afraid to move your money around as often as you like. You need to be getting an interest rate that is good, because as you get more and more money, this will be really vital to your savings.
Saving is such a good thing to do, it means that the future won’t be so scary for you. Having an emergency pot as well as a “serious” savings account is a great idea. There will be always things that take you over your budget from time to time and your emergency savings will help to soften the blow with these. Savings can help you afford those things in life that you have always wanted and they also mean that you can lead a happy life, when you choose to retire.