Even if you are on a low income, it can still be possible to boost your savings. If you would like to find out how to save money fast on a low income, we here at Moneyfarm have some actionable tips that may help.
| Is it possible to save money fast on a low income? | It may be challenging, but it is possible |
| How to save money fast on a low income? | By cutting expenses, creating a budget, and switching lifestyles |
| What is considered a low income in the UK? | Households living on less than 60% of the median income of under £30,000 |
| How much do low-pay employees earn in the UK? | £9.85 |
What is a low income?
According to the UK government’s department of work and pensions, a low income household lives on less than 60% of the national median income, which is under £30,000 (before housing costs). The household, in this instance, is a couple with no children. In 2022, ONS stated that low pay is defined as employees earning below £9.85 per hour.
How can I save a lot of money fast on a low income in safety?
Before we get into the topic of how to save lots of money quickly on a low income, let’s start off with a warning.
Beware of scams!
There are plenty of crooks around brandishing scams of one sort or another that all sound very genuine. Don’t be fooled. The only way to save money fast is by cutting costs, limiting spending money, and finding a genuine, safe savings account or investment vehicle in which to tuck away as much away as you can.
Why am I struggling to save money?
You are more likely to struggle with the want to save money if you don’t understand the importance of doing so. Having enough money to get by on a day-by-day basis is all very well, but it puts you in a very precarious situation. What happens when unexpected costs come knocking? How will you be able to finance them?
It’s advisable to have a short-term plan for emergencies, and you can then think about a longer-term plan for things you may want in the future, such as buying your first home, helping your children with university fees, or saving for retirement. One potential solution is the different types of ISAs that are available. They are geared toward various targets.
A cash ISA is useful for short-term savings to cover unplanned costs, while a Lifetime ISA can help you with saving for a deposit on a property. A S&S ISA might be more suitable for long-term investing and can be used to generate a retirement income.
Other ISAs include innovative finance ISAs and junior ISAs. The best ISA to use is very much down to your personal circumstances and financial goals.
5 tips for saving money
Cultivating a saving habit is the foundation for financial security and success. Having enough money to deal with any financial emergencies and take advantage of opportunities that present themselves is key. It can be done. Starting off with a low-income savings mentality will get you underway, and here are 5 tips to help you on your way.
Tip 1 – Create a budget
The best way to control your spending is to create a budget and stick to it. As well as helping you to manage your spending, it creates a sound base from which you can then plan how to save money fast on a low income. There are budgeting apps available online. If you’d like help with creating a budget, one of these could be just the job.
Tip 2 – Automating your payments
Automating your payments can help you to keep up to date with any bills and savings. It means you will be able to forget worrying about missing payment deadlines, incurring late payment fees, and making payments into your savings account.
Tip 3 – Getting rid of debt
If you are in debt, the likelihood is that you will be paying interest on that debt. The more interest you’re paying, the less money you’ll have for saving. Clear the debt as quickly as you can, particularly credit card debt which can be quite crippling.
Tip 4 – Put a financial safety net in place
Knowing how to save money fast on a low budget can easily be disrupted if unexpected expenses or events arise for which you are not prepared. Create a safety net. Your net might include a fund to tide you over for 3 to 6 months should you lose your job, or pay for an unforeseen costly car repair, etc.
Tip 5 – Take advantage of free tolls and other resources
There are plenty of free tools, apps, and resources to be found online that can help you with saving money on a low income. They help you to keep track of your finances and make managing them that much easier.
Using the 30-day rule to save money
The 30-day rule for saving money became known more widely thanks to an article published by The Express newspaper. This rule can be particularly useful for people who are interested in low-income saving but who are prone to impulse buying.
Instead of succumbing to the sudden urge to buy something, you set aside the sum of money the purchase would have cost you and put it into a savings account. Leave it there for 30 days. If, after the passage of that time, you still feel the same urge to buy that item, you can do so.
The chances are, though, that, as with most impulses, they pop up out of nowhere and pass quickly, so the 30-day “cool off” period could mean the urge is no longer there, and the money can stay in the savings account.
How can I save £5,000 in a month?
Saving £5,000 in a month is a big ask for anyone, but for those attempting low incomes savings, even more so. If you take the average monthly salaries, basic monthly costs, and remaining income figures of the 18 cities on cv-library.co.uk and calculate the average remainder of the 18 cities included, you’ll come up with a figure of £1,106.20 per month.
This is based on an average income figure. To save £5,000 per month, you’ll likely need to be in a much higher income bracket. If you can save such a healthy amount, learning the basics of how to invest money is also advisable.
How can I save £1,000 in a month?
Aiming to save £1,000 per month on a low income is more achievable. But even then, you will need to employ good money management disciplines, as £1,000 is still a lot of money to many.
How can I save £1,000 in less than a month?
If you’ve set your mind on saving £1,000 in less than a month, you will need to revisit all the tips we’ve given you above, and if you’re still struggling, you might have to dig deeper. Savings for low-income earners has never been easy, and you might need to think about selling some of your possessions or developing a side-line to increase your income.
How can I save £10k in 3 months?
If you are hoping to save £10K in 3 months, you might be tempted to seek out some high-return investments in the UK. The extra money these types of investments can return is very tempting. However, any form of investment carries risk; generally speaking, the higher the return, the higher the risk.
Believing high-return investments are how to save money fast on a low income might suit some people but not others. Your preferred investor profile should influence your attitude towards risk, the financial decisions you make, and your investment strategy.
What is the 100-day saving challenge?
Every now and again, a savings fad makes the headlines, and one of the latest ones to do so is the so-called “100-day saving challenge”, as reported on time.com. It started out as a hack from Tik-Tok promising to help people to save as much as $5,000 in 100 envelopes over 100 days.
The way it works is to get 100 envelopes and mark them from 1 to 100. On day 1, you take envelope 1 and tuck £1 into it. On day 2, put £2 into envelope 2, and so on, until on day 100, you’re putting £100 in envelope number 100.
This Tik Tok hack has now gained over 1.5 million views, and if you can afford to try it, you could save up to £5,050 if you follow it through religiously. Unfortunately, it’s not really how to save money fast on a low income, as even the average disposable income would be overstretched.
Saving with low income via the help to save scheme
Trends are ok, but something more down to earth and a more practical way of saving on a low income is the UK gov low-income savings scheme, referred to as the Help to Save scheme.
The Help to Save scheme allows those receiving Working Tax Credit or Universal Credit to receive a bonus of £0.50 for each £1 they save over a 4-year span. The maximum you can save put into the scheme in any given month is £50.
We wouldn’t say it is how to save money fast on a low-income budget, but it is a way of saving with low income that gets help from the government, the idea being to help to get those on low incomes on the right path to developing a healthy savings habit.
As they say, from little acorns, mighty Oaks do grow. If your monthly income grows, and with the right financial planning, you might one day be in a position to open a general investment account.
FAQ
What are the first steps to saving money on a low income?
The first step to saving money on a low income is to create a budget plan and consistently stick to it. Then track and reduce your expenses. You need to know where your money is going before you can start making changes to save more.
Is it possible to save money fast on a low income?
Yes, it is possible. It will be very challenging, and you may have to make some sacrifices and commit to a plan. You may need to curb unnecessary expenses, increase your income, and prioritize your savings goals.
How can I reduce my monthly expenses?
The various ways to reduce your monthly expenses include cutting dining out and entertainment subscription services expenses. Also, look for ways to save on utility bills and groceries, and find cheaper ways to commute.
*As with all investing, financial instruments involve inherent risks, including loss of capital, market fluctuations and liquidity risk. Past performance is no guarantee of future results. It is important to consider your risk tolerance and investment objectives before proceeding.
