A savings cushion is something that is highly recommended and could prove invaluable. If you were to lose your job unexpectedly or suffer some other financial hardship, having three months’ salary stashed away to be used in an emergency could make a huge difference to your financial health, not to mention your mental wellbeing, while you work hard to recover your income.
You may, therefore, find it surprising to learn that one in three Brits has less than £1,500 in savings.
Yet it is simultaneously completely understandable. When money is tight, finding a little extra to stash away can feel like a very difficult goal indeed.
Here in this article, we have suggested 5 of our favourite ideas to start saving money and to kick-start the savings habit. What’s more, all of these can be implemented right now.
Round it up
There are a number of apps and banks now that offer a ‘round-up’ service – that is, they will round up every purchase you make to the nearest pound, and pop the extra into a savings account. For instance, if you go out for dinner and spend £18.20 on a meal and a glass of wine, then that will be rounded up to £19 in the background – with the extra 80 pence going into your savings account.
This takes the onus off you to remember to save, and psychologically isn’t a huge amount of money on top of each purchase – so won’t feel daunting – yet these small sums can quickly add up.
If you are interested in this, get started by looking at Lloyds Save the change or Starling.
Embrace Artificial Intelligence
When your balance is at a level that the AI determines it is acceptable to do so, it will automatically transfer money into your savings account – again, taking the onus off you do actively do any saving at all, and instead put your pounds into the hands of the computers. Do computers even have hands??
The Coin Jar
This is pretty much the polar opposite of the AI approach discussed above – the good old-fashioned coin jar.
Simply get yourself a large jar or other container, cut a slot in the lid and then (optionally) glue the lid shut so you aren’t tempted to open it and dip in. Then, quite simply, empty your pockets of change each day and pop it all in the jar. You could alternatively only add pound coins or £2 coins to the jar.
Either way, once it is full, prise it open (please be careful) and take all of that money straight to the bank to be paid into your savings account.
Cancel or Review Your Subscriptions
It is very easy to just allow your subscription services to roll over month after month, but now is the time to re-evaluate each of them and the value they offer to you. Are you really using them to their full potential and getting your money’s worth? Do you need a Spotify account and an Amazon Prime account, when both allow you to stream music? Could you swap your Spotify subscription for a free Deezer subscription and just tolerate the ads?
Also, is there a way you can save money but keep the service? For instance, a Netflix standard plan subscription allows two devices to stream simultaneously, whereas the basic plan only allows one device to stream at a time. The basic plan costs £5.99 per month and the standard plan costs £8.99 per month.
So if you and a friend club together and convert your two separate basic plans into one standard plan, sharing the cost, you would each save around £20 annually with zero impact on your service.
If you do cancel any subscriptions, then you could just set up a monthly transfer into your savings account for the cost of your subscription. You will be used to paying that amount out anyway, so you won’t even notice a difference.
Get a better savings rate
Interest rates across the board aren’t great right now for savers, but there are savings accounts that pay better than others. However, there is a general reticence to switch savings accounts – with the UK population said to be more likely to get divorced than to switch bank accounts.
Take some time to seek out a better savings rate, ensure you are making use of your tax-free ISA allowance and every pound you save will work slightly harder for you. A couple of decimal points on your interest rate may not be much on the face of it but can make a big difference down the road.