Knowing where to start when you want to save money can feel daunting, but it doesn’t need to be. With a few small changes to the way you manage your money, you can create a clear path forward to get where you want to be financially.
Here are some steps to get you started.
1. Open a savings account
Savings accounts can be a smart way to store your money and make it grow. As well as removing the temptation to spend any funds left in your current account, savings accounts enable you to earn interest on your money over time.
What’s more, you can then earn interest on the interest you’ve already earned, speeding up your saving. This is known as compound interest.
Finding the right type of savings account is key. If you’re happy to lock your money away for a while, a fixed rate savings account can help you maximise the interest you earn. An easy access savings account could give you flexibility to withdraw if you need to, while a regular savings account may offer rewards for regular contributions. There are also Individual Savings Accounts (ISAs) that enable you to save without having to pay tax on the interest earned.
The type of account that will suit you will depend on your goals, how often you plan on contributing and when you’ll need to access the money.
See more about the different types of savings accounts.
2. Create savings goals
Whether it’s for a purchase, an event, or peace of mind, having a specific goal to save towards can help you stay focused. Once you have your goal, decide how much money you want to save and how soon you need to save it. Then work out a realistic plan on how you can achieve this.
There are calculators that can help you do this. For example, the Money Advice Service has a calculator that can work out how long it will take to reach a certain savings goal and how much you’d need to save per week/month to get there.
If you’re not sure how much you’re able to save a month, you can review your spending and try something like the 50-30-20 guide to see if it could work for you.
You may want to try writing down your savings goals and placing them somewhere visible like the fridge, or create a note in your phone. Having these little reminders helps the goal to stay at the front of your mind and can make it easier to stick to your plan.
3. Pay yourself first
Prioritising your saving is important for staying on track. When your salary is paid, try to pay money into your savings account first (taking into account how much you’ll need to cover mortgage/rent and bills). By separating your savings straight away you can reduce your temptation to dip into them throughout the month. If you’re saving the same amount each month, you can set up a standing order so you don’t forget to move your money.
For HSBC customers using our mobile app on an iPad or iPhone, you can try the Balance After Bills tool to help make sure you’ll have enough to cover your monthly costs. Based on your regular bills, it estimates what you'll owe for the month ahead. Then it subtracts that amount from your current balance to show you what you could have left.
4. Save while you spend
To get into the habit of saving regularly, you could check your balance at the end of each day and put any extra pence into your savings pot. For example, if your balance is £166.05, you could add 5p to your savings. It's an easy way to keep your savings growing while having little impact on your day-to-day spending.
If you want to try something different, you could build up from 1p. You start by paying in 1p to your savings, then 2p the next day, 3p the next day and so on. If you’re able to do this for a year you’ll end up with £667.95, as well as what you earn in interest.
5. Keep saving
Once you reach your goal, there's no need to stop. Experts recommend having around three months of your living costs saved to cover you should something unexpected happen.1 You may end up having different savings pots for different purposes, such as one for your emergency fund and another for a new car.
And if you’re struggling to maintain momentum and reach your goal, don’t stop. Saving even a small amount is better than nothing. Work on developing the habit and then try to gradually build the amount you save over time.
If you’re finding it difficult to free up the cash to get your savings to grow, there are some tricks that may be able to help.