As the end of the University year comes to a close and a new influx of graduates enter the workforce, now is the time to start planning for the future. After years of relying on overdrafts and part time student jobs, you’re hopefully beginning to earn a reliable wage and can finally afford to do things that you couldn’t before.
Receiving your first payslip is often a momentous occasion with a sudden abundance of cash at your fingertips, but if you want your money to go further, it’s important to try to not blow it straight away. Graduate life comes with costly responsibilities, and paying for cars and holidays while saving for the future can be expensive. Here’s our guide to saving up for the things that mean most to you.
There’s no time like the present
It’s important to remember that the sooner you start saving, the better. If you don’t have any immediate plans that need urgent attention, such as a last minute holiday, then it doesn’t matter how much you start saving now, as long as you contribute something.
Having a strong savings pot behind you will enable you to keep your options open in the future, whether you want to go travelling, start your own business or invest in something. You might also want to save up for a rainy day fund, this could prove vital in the event of an emergency where you may need some cash to fall back on.
Gradually the amount will increase over time and you’ll soon be able to build up somecash for when you need it most.
However, if you do need the money fast, the amount that you save is an important factor. Work out how much you need to save each month by dividing the total amount of money required by the number of months you have to save. Once you understand this then it’s time to set up a savings account.
One way of making sure that you can afford the important things in life is by making simple sacrifices elsewhere.
However if you are careful with your money, you’ll be able to gradually save up enough to reach your goals, whether they are short term or more long term ambitions..
Record everything that you spend either in a notebook, on your phone, or in a spreadsheet on your laptop. Once you begin to see where you are spending your money it will allow you to make some changes. You might be surprised just how quickly things mount up. Spending £3.50 on your lunch each day equates to £910 a year. By identifying and consciously cutting back on everyday luxuries, you might be surprised by how much further your wage could stretch. Of course, as your career develops and your salary grows, you might be able to incorporate some of these niceties back into your day-to-day - but learning to live within your means and trying to save cash for the future is a valuable lesson whatever stage you are in your career.
Managing your money
It’s not only the little day to day costs that can mount up, monthly direct debits can also take a large chunk out of your funds. Assess your current phone plan to make sure you’re getting the best deal. If you’re paying for more than you need, some networks will let you change your phone plan after you’ve been with them for a certain amount of time, allowing you to lower your bills each month. If you’ve got a gym membership that you don’t use, see if you can cancel or sell your membership onto someone else.
Make the most of your savings
Putting a percentage of your income into a savings account can be a great way of saving for your future. Set up a direct debit to transfer your money from your current account into your savings account on pay day, this will save the temptation to spend.
It is recommended to save one-third of your salary each month, this may sound like a lot, but if you can afford to make a few cutbacks elsewhere to reach this goal, you will soon start to see your funds grow. Due to the pressure of bills, overdrafts and student loan repayments, one in four people aged between 22 and 30 now live with their parents. If you’ve moved back in with your parents and don’t have excessive bills to pay, this can be the perfect opportunity to take advantage of your low outgoings. You might regret not being more careful with your money when you move out and have to designate a percentage of your wage to rent or mortgage repayments, bills and council tax.
When looking for the perfect savings account, look for a bank or building society that offers the best savings rates so that you can earn extra money through interest. This will boost your own contributions, helping you to reach your goal a little quicker.
The best ways to save
Selecting the right savings account is crucial in order to make the most of your cash. Banks and building societies usually offer a range of varying products to suit the wants and needs of their diverse customer base.
Easy Access Savings Accounts
Terms can vary depending on the bank or building society, but an Easy Access Savings Account will give you somewhere secure to stash your savings, without locking your money away out of your reach. Whether you want to add more cash or withdraw for something special, you’ll be able to access your funds whenever you like. You’ll also benefit from a great rate too. This is a particularly good option for short term savings, so if for example you’re saving up for a holiday or a car, and only have a limited time period in which to save, this could be the right type of account for you. The rate is often lower than the rates offered with fixed term accounts, but you get the advantage of being able to draw on funds when you need them.
If you’re looking for an even better rate than an Easy Access account can offer, but still want to maintain some flexibility so that you can dip into your savings when you need them, a Notice Savings Account could be an option for you. You’ll earn interest on top of your savings and will be able to make as many deposits and withdrawals as you like, providing you give notice before you take money out. So if for example you’re saving up for a long weekend in Paris in November, make sure you notify your bank early to let them know that you’re going to want to withdraw. Notice accounts can also be ideal when saving for a mortgage as you could benefit from the incentive not to dip into the money whenever you fancy a treat, whilst retaining the freedom that access to cash in case of an emergency brings.
Individual Savings Accounts (ISAs)
ISAs are a great way of saving money and maximising your interest. On most savings accounts interest is taxed before it even reaches you, but an ISA allows you to save a tax free amount each year and since April 2015 that is now £15,240. This is a great way of making the most of your savings and getting that little bit extra for every pound that you save.
Over to you
Graduating from University and starting adult life can be exciting, particularly if you’ve started to earn a regular salary in a graduate job. But with the freedom of graduate life comes added responsibility. It’s easy to get excited as soon as your wages enter your account each month and it can be difficult to resist the temptation to blow it all on pay day, but if you want to save for the all-important luxuries, it’s best to be careful with your expenditure.
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