Do you find it hard or impossible to save?
- many people feel they ought to be able save but always fail when they try.
- others are saving for a big goal but not as fast as they want.
- if you are struggling with money, you may desperately want a small emergency savings pot to make life a bit less stressful.
There isn’t a simple answer – no way is easy for everyone. What works for one person may not suit you because your circumstances are different. In the case of the government’s Help To Save scheme, you have to be working and getting specific benefits.
Sometimes finding which is best for you depends on your mindset. One approach may make you feel more optimistic and happy about continuing with it. That beats one that you find more uncertain.
All the ways discussed here work for some people. Try one – but be prepared to switch, not give up, if you don’t think it’s right for you.
1) Save cash in a jar, tin or piggy bank
The trick with getting this to work for many people is to give yourself a challenge:
- choose a specific coin and save all of those. This makes it feel more like a game. You may not miss the 1p or 2p coins at all. On MSE Forum people are adding their name to the list to put aside all the 50p coins they get.
- aim to save 1p the first day, 2p the second, 3p the third. That adds up to over £650 a year but gets very hard later. Many people prefer to print out a chart, and then save and cross off what is left in your purse every day, so £2.67 in change can cross off Day 267 even though that is months ahead.
If most of your spending is now contactless, this one isn’t going to work well for you, but the next one might…
2) “Round it up” every time you make a purchase
Banks including Lloyds, TSB, Halifax, Monzo and Starling offer a facility for you to round up payments you make by a debit card to the nearest pound and put the small extra amount into a savings account.
You can’t predict how much will be saved by these, but if you use your card a lot it can work out at a useful amount.
3) “Round it down” – skim your bank account
Here you look at your bank account every day and if it says £156.45, you “skim” the 45p off and move it into a savings account.
You can make this more of a challenge by rounding it down to the nearest £5, so moving £1.45 in that example. Or round down to the nearest £10.
If you check your bank app every day, this is very little work and it can be satisfying to see the small amounts really do add up.
This isn’t automatic though. For some people that is a plus as they feel more in control. Others find they forget or too often decide not to so it doesn’t work well.
4) Stealth saving
The first three ways have all taken small amounts at random, guessing that you won’t miss them.
A more scientific approach is taken by two apps, Chip and Plum. They monitor your bank account and spending against what you usually spend and your expected future bills. If you are ahead for the month, they take a small amount – this can happen several times a month – and move it to a savings account. You can tell the apps to be more ambitious or more cautious in what they save for you.
Both apps work well – I have reviewed them here. Many people really do find they making it painless to save some money each month.
5) The government’s “Help To Save” introduced in 2018
In 2018 the government introduced a new savings scheme specifically aimed at people who were working but on a low income, so they also get either Universal Credit or Working Tax Credit. If you qualify, you can save from £1 to £50 a month for 4 years, up to a maximum of £2,400.
Instead of interest, a very generous bonus is added after two years – it is 50% of the maximum amount you have saved during this time. So if after a year you had saved £300 and then you had an emergency and took out £250 of it, and after that only managed to add £1, you would get a bonus of £150.
After the two years, you can close the account with the bonus or let it run for the next two years and get another bonus at the end and at the end of the fourth year, when the account is then closed.
This isn’t going to work well if you put £40 in one month and take it out the next, you do have to let the balance build up.
And even though the bonus looks large, if you have expensive credit card debt you would probably be better off to pay the “savings” off that debt rather than you this scheme.
But if you do have a bit of spare money each month this could be an effective way to save for you. It takes about 3 working days to get the money out if you need it.
6) Say No and save that
This one only really works if you should have plenty of money but it all disappears on unplanned clothes bargains, takeaways, taxis etc.
It’s obvious that deciding not to buy something helps your finances, but the trick here is to convert “saving money” into actual “savings”. When you decide not to buy something you could have afforded, immediately get out your mobile and transfer the amount “saved” into your savings account.
This way the money isn’t still in your account, to be frittered away on something else.
People who like this option find they get a psychological boost by moving the money over – it’s like giving yourself a big hug for being sensible with money. Those hugs can get addictive, you want the next one to happen.
7) “Pay yourself first” – essential if you want to save a lot
With a big savings target, it’s best to start adding money to your savings by standing order as soon as you get paid.
You could just look at the end of the month and sweep spare money into your savings account then. Some banks such as HSBC and First Direct let you set this up automatically. But if you put the amount you want to save away when you are paid, you are less likely to spend it!
Don’t be too ambitious with your standing order. If you try to save too much and most months have to go and raid your savings, it gets depressing. It’s better to save a decent amount every month automatically, then use one of the other approaches above as well to be able to top-up your savings at the end of the month.
Where to keeping your savings
Many people don’t want their savings to be too easy to dip into, but need to be able to get them in an emergency. You could look at opening an account with a bank or building society you don’t use at the moment, or a Credit Union account.
Once you have a small emergency fund put by, think about using the savings at the end of each month to pay some extra off a credit card or catalogue bill.
Savings for a house deposit are usually best kept in a Help to buy ISA or a Lifetime ISA – MoneySavingExpert looks at which you should choose.
Too much debt?
If you have bills and debts you can’t pay, or if you are only getting by because your credit card and overdrafts balances are going up every month, then these savings ideas either won’t work or will make your debt situation worse… Lack of savings is not your most important issue, you need to talk to a debt adviser who can help you look at what your options are.