According to the National Savings and Investments’ (NS&I) Quarterly Savings Survey a rising number of people are becoming more conscious about their future finances, with savers putting more money aside during 2014 than any time in the past decade.
With real earnings having fallen by nearly 10 per cent since 2008, the prospect of saving for the future has slowly been slipping out of reach for some people living in the UK. In fact, further studies by the NS&I show that for big purchases such as summer getaways, many individuals frequently overspend and on average exceed their summer holiday budgets by almost £120.
One way to tackle this problem is by setting a savings goal. Saving with a target in mind, whether it be a car, holiday or a deposit for a house, provides savers with extra motivation to keep putting their money aside and can lead to them reaching their goal quicker.
Establishing a goal
Having a specific target to work towards has proven to be a far more effective way of saving than attempting to save with no end goal in sight. Figures from NS&I show that people who have a financial focus save up to £550 a year more than people who don’t. For savers who have multiple goals, prioritising them in terms of importance can ensure their targets are realistic.
After establishing a goal, savers need to determine how much they can afford to set aside, taking into account other expenditures such as mortgage repayments or utility bills. For immediate or short term goals, savers need to calculate how much they need to put aside to meet their goal, without forgoing prior commitments, and plan accordingly. If their goal isn’t time pressured, savers can decide on more realistic monthly savings contributions to achieve their goal.
Practical saving methods
Maintaining the savings plan can be the trickiest part of the process, so finding methods that simplify the task may help. Many savers opt to set up a standing order or a direct debit from their current account to their savings account to ensure they don’t miss any payments. In the event that an individual discovers they’re paying too much into their savings, they may want to adjust the figure to tailor their savings contributions to suit their new circumstances. Equally, if there are surplus funds savers can increase their regular savings contribution.
Savers can also make use of available technology to keep track of their outgoings. Finance conscious apps such as Savings Goals and Money Lover could be an effective way for savers to manage their money.
Choosing the right savings account
There are many different types of savings accounts on the market, so it is important that savers choose the best product for their savings needs. For example, an Easy Access Account may be more attractive to savers who require the full flexibility of regularly accessing their money, or for those with short term savings goals.
Alternatively, savers who are looking to start saving with a large sum of money and may want to avoid interest rate fluctuations should consider a fixed rate account to ensure peace of mind. For those long-term savers that still want to retain some access to their money, Notice Accounts generally offer better interest rates than an easy access account, but with some flexibility about accessing funds built into their terms. Finally, For those wishing to take advantage of tax free interest on their savings then they may want to consider a cash ISA.
Aldermore Bank is a leading UK provider of personal savings and ISA accounts. For more information regarding our services, don’t hesitate to visit our personal savings pages or get in touch.
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