Before you rush to check out those January sales, take a moment to assess your finances. After the blowout over the Christmas holidays, everyone’s bank accounts have taken a hit. Start off the new year by making a savings plan to carry out in 2018. Keeping on top of your spending will relieve stress in the long term. Once you get into the habit of saving, paying bills and emergency expenses becomes so much easier to handle. Read on for some tips on how to build your savings up. You might be able to afford that new car or dream holiday sooner than you think!
Gain Interest While Saving Money
You might not know where to begin when it comes to saving money. First things first, if you haven’t already, then look into opening a savings account! In addition to keeping money for the future, you can gather interest on your savings. There are different account types with varying interest rates, so look around for one that suits your needs.
For example, an easy access savings account would allow you to withdraw from your savings whenever you want. The downside is that they often have lower interest rates, generally 0.25% AER. A Post Office Online Saver account has an excellent rate of a 1.05% gross fixed bonus for the first year. If you prefer to manage your money online and need unlimited withdrawals, this could be the best option for you. However, you might end up switching to somewhere else when it drops back to 0.25% after 12 months. Be wary of the uncertainty of variable interest rates.
The same goes for Nationwide’s FlexDirect account. Current accounts like these allow you to earn interest on the money in your main spending account. Nationwide offers a fixed 5% AER on £2,500 for the first year but drops to 1% after that. If you open a current account with Tesco Bank, it guarantees 3% AER on up to £3,000 until April 2019. Each person can open two accounts, so you could gain 3% on £6,000 if you spread your money. There are multiple conditions you need to meet every month, but you can get extra Tesco Clubcard points when you make purchases.
Create a Savings Account For a Rainy Day
Most people save up for a specific purpose, such as buying a house or travelling abroad. If you don’t have a target, it’s still a good idea to open a savings account. You never know when you might suddenly need money for an urgent reason. If you want to put your money away without touching it, you should look into fixed-rate bonds. Cash ISAs are no longer more attractive than regular savings accounts. While interest gained through a cash ISA was tax-free, since 2016 the Personal Savings Allowance lets anyone earn up to £1,000 annual interest without tax.
Only invest in a fixed-rate bond if you definitely have the money to spare and won’t need to access it. You won’t be able to withdraw any of your savings for the duration of the fixed term. This will be a minimum of a year. Some banks won’t let you deposit more money, so you’ll only gain interest on your first deposit for that year. To give you a little wiggle room, try a limited access savings account. Virgin Money offers a Defined Access E-Saver account with 1.01% AER and up to three withdrawals per calendar year. If you need to withdraw four or more times, the interest rate will drop to the basic 0.25% AER.
Consider Switching Banks
Some banks will pay you to open an account with them if you swap from another bank. This is a good way to get some extra cash, but it’s also a big commitment. You’ll have to close your existing account, and updating your your details for payments can be a hassle. If your current bank account has fewer benefits than you would have at another bank, you may as well go for it. You could get a better deal on interest rates and get paid for it, too.
HSBC awards a big bonus of £150 upfront for switching to their Advance Account, plus an extra £50 after one year. Opening the Advance Account makes you eligible to open a regular saver account, with 5% AER for up to £250 a month. However, you have to pay quite a high minimum of £1,750 a month into the Advance Account. Halifax Reward will give you £75 when you open the account, plus £3 every month if you meet the criteria. It’s a smaller bonus overall, but you’ll only need to pay in a minimum of £750 per month.
Give Yourself a Budget
Once you’ve sorted out your bank and savings accounts, it’s time to sort out your spending habits. Make sure all your bills and payments are cleared first and foremost. Work out your travel expenses so they can be set aside each month too. If you commute by train or bus, invest in discount railcards and monthly or annual tickets to save money. Next, you need to set a limit for your food budget. Try lowering it by shopping at cheaper supermarkets, like Aldi and Lidl. Avoid buying lunches every day and bring your own from home instead. This will also help to reduce wasting money if you’re always using up what’s in the fridge and cupboards.
With all your necessities covered, work out the portion of the money you have left that you can afford to spare. Don’t forget to give yourself an allowance for things like clothes and entertainment. Saving doesn’t mean you can never treat yourself. We’re all sick of those articles telling you to stop buying coffee every morning, assuming that you’re in the position to afford that extra expense in the first place. The point is, don’t go overboard and buy too many new things you don’t need. Designate how much you want to save per month, and move it into your savings account if you have one.
If you have a set goal for what you eventually intend to spend your savings on, calculate how much time you have to save up and how much money you’ll need to put aside every month to meet that goal in time, and stick to it. Keep tabs on your spending habits and track your progress by logging everything into a spreadsheet. It’s not as complicated as it sounds, and you can even use Microsoft Online for free.
Saving Money With a Family
When you have kids, saving up can seem impossible. That doesn’t have to be the case, though. When you’re spending for a family, you can save money by joining loyalty schemes like Boots Advantage or Sainsburys Nectar. Make sure you have the best possible deal for TV, internet, and entertainment packages. Sky, Virgin Media, and services like Netflix and offer multi-device or family subscriptions for huge comparative annual savings.
Consider opening savings accounts for your children, too. Accounts for kids often have higher interest rates. You can put money in for them to save for their future, or encourage your children to invest some of their pocket money every month. This will also help them learn how to manage money for later in life. If you have a partner who pays fewer taxes than you do, they will have a higher Personal Savings Allowance. Assuming that you can trust them with this, move your savings into their accounts.
The 365 Challenge
There are many tips and tricks out there for saving money over the course of the year. One of these is the 52 Week Challenge, where you put £1 into your savings for the first week of the year and increase this by £1 every week. By the end of the year, you’ll be putting away up to £52 a week. The problem is that with Christmas at the end of the year, who can afford to spare around £50 a week? The answer to this is the “365 Challenge,” which is more consistent.
How this works is that on the first day of the week, you put £1 into your savings, then increase this by another £1 every day. On the seventh day of the week, you’ll deposit £7, before resetting to £1 the next day at the start of the new week. At the end of the year, you’ll have saved up a decent £1,500 – compared to the £1,378 total from the 52 Week Challenge. This is a great way to steadily top up your savings account, without having to deposit a big chunk of your wages every month.
Remember that saving money is a gradual process. Don’t give up if you aren’t saving as much as quickly as you’d like. There will be months where you don’t have a lot of money to spare, and months where you have more. All you have to do is put your saving plan into motion, and keep going with it. Good luck!