How to become a smarter saver?

Nearly one in four Brits have no savings, and over 50% of us don’t have enough savings to live through a month with no income! Saving might not come naturally, and it’s easy to get caught up in the day to day - but if you’re able to start small and create a savings habit, you can build a meaningful pot of money. Here are some simple steps to help you get going.

A starter emergency fund

Before you worry about repaying debts or aiming for a big savings goal, first aim on building a starter emergency fund of £1,000. This will build your confidence and help reduce the need to take on more debt. Break these goals down into reaching smaller milestones of £250, £500, £750 until you get to £1,000. 

Take stock of your current non-mortgage debts

Once you’ve got your starter emergency fund in place, then focus on paying off all your non-mortgage debts as fast as you can using the snowball method. This will reduce the amount of interest you'll pay, and eventually free up the monthly repayments for regular saving. Consider whether a salary-deducted Salary Finance loan could help you consolidate the more expensive and larger debts. Clear all non-mortgage debts before putting more into your savings, and try to avoid borrowing more money on credit cards or overdrafts to help you set off without and debt on your savings journey.

Fill up your emergency fund

Once you’ve cleared your non-mortgage debts, you’ll have more disposable money that you can then use to increase your emergency fund to between 3-6 months’ essential expenses. Life throws financial curve balls. It’s not a question of ‘if?’ but ‘when?’ that happens, so only when you’ve fully funded your emergency fund can you start to save for other goals.

Label your savings

Sit down and think about what you’re trying to achieve, when you want to achieve it and why that matters. Call the savings account something that will resonate and remind you why you are saving. For example saving for a 10% house deposit in 3 years for a £250,000 home could be ‘A home of our own’ and the target would be £25,000 or £700 per month. Calling your pension plan ‘Make work optional’ fund might motivate you to put higher contributions towards it when you can.