To achieve financial security and success here in the UK, you must learn how to save or invest money. Learning how to save money isn’t rocket science, but given the financial challenges many of us face today, with high inflation and the rising cost of living, it’s not all that easy either. This Moneyfarm blog has been written to help by suggesting a few useful hacks and tips.
How to save money in the UK: Summary Table
|Is it important to save money?||Absolutely, save for financial freedom and security|
|How can I save money on my bills in the UK?||Reduce energy usage, negotiate utility bills, and use energy-saving electronics and light bulbs|
|What are some tips for saving money on groceries?||Meat plan, create and stick to a grocery list, buy generic or store brands, buy in bulk, buy sale items, and shop at discount stores|
|What are a few mistakes people make when trying to save money?||Not budgeting, not keeping track of spending and not planning for unexpected expenses|
Useful tips on how to save money
You can’t save money unless you have the wherewithal to do so. Assuming you have a steady income and you’re not contemplating taking on another job, the first thing you need to do is manage your spending as efficiently as possible. Here are a few savings tips you might find useful regarding how to save money in the UK.
Set up a free overdraft
Many high street banks offer their users a free overdraft facility. One example is First Direct which offers a free overdraft facility of up to £250 if you open a 1st bank account.
Transfer your credit card debt to a 0% interest card provider
Credit card debt can mount up surprisingly quickly. Why not transfer your balances to one of the 0% interest card providers? These providers don’t charge any interest at all for a set period – anywhere from 6 to as long as 24 months. However, after that, interest rates kick in and can be quite high, so if you decide this is a good way on how to save money in the UK, pay off the balance in full before the deadline is up.
Review and cancel any unrequired direct debits
People sometimes get a little blasé about certain direct debits set up over time. They are often of little or no use and are no longer necessary. You can help yourself with how to spend less money on UK non-essentials by combing through your bank statements to review and cancel any superfluous direct debits.
How to save money on food in the UK
One way on how to save money on groceries in the UK is to buy in bulk and batch-make dishes you can store in your freezer. Also, buying fresh produce rather than pre-packaged, precooked meals is not only cheaper but healthier too. You can find some good ideas online, like the “Budget dinner recipes” page on the BBC website.
Other saving tips include shopping online, which does away with travelling and parking costs, as well as getting access to cheaper prices and looking for an alternative, less expensive mobile phone service provider.
How to save money on energy in the UK
You can even reduce things like the cost of washing your clothes. There are some useful tips, such as reducing the temperature of the wash to 20 or 30°C, washing later at night, air drying clothes instead of tumble drying, and washing clothes in large batches rather numerous small-sized batches. These small, seemingly insignificant changes all add up and can reduce energy costs and therefore heating bills.
You’ll find some other useful tips on saving energy in the home in the “Warm home hacks” on the energy saving trust website.
What is the 30-day rule?
The 30-day rule is aimed at impulse buyers. If you’re subject to impulse buying, this rule suggests that instead of giving in to the impulse to buy something, put the money you would have spent into a savings account or Cash ISA and leave it there for 30 days. Given the nature of impulses, it’s highly likely that after 30 days, the impulse has passed, in which case you leave the money where it is.
What is the 50 30 20 rule for saving money?
The 50 30 20 rule is a guide on how to save money in the UK by keeping within certain disciplines, which are:
- Putting 50 % of your income aside for essentials such as housing costs, food and travel to and from work.
- Setting 30% of your income aside for discretionary spending on things like eating out, taking trips, and paying subscriptions.
- The remaining 20% is reserved for clearing debts or putting money into savings accounts or investment vehicles like pension funds or one of the different types of ISAs.
Choosing an ISA as a way to save money
We’ve mentioned ISAs a couple of times now, so let’s look at the potential attractions of how to save money in the UK via this type of savings vehicle.
All UK residents have an ISA allowance. That allowance is £20,000 per annum, which means you can save up to £20,000 across all ISAs in any one tax year. The £20,000 is the total amount you can save, and it can go into either a Cash ISA, an Innovative Finance ISA, or a Stocks and Shares ISA. You can also put money into a Junior ISA, but only up to £9,000 per year, or a Lifetime ISA, only up to £4,000 per year.
You can divide your Stocks and Shares ISA£20,000 annual ISA allowance across all ISA types, provided you do not exceed the maximum limit. Within said maximums, your contributions qualify for tax relief.
A Cash ISA (including a Junior Cash ISA) is akin to a savings account. Returns are low, but there is little risk involved. The other ISA types are investments rather than savings, and as such, they carry an element of risk. The ISAs vs Savings Accounts debate hinges largely on your appetite for risk – that and your expectations of the potential returns to be made.
ISAs are but one type of savings or investment vehicle. There are many other ways on how to save money here in the UK, including Bonds (government or corporate), Exchange Traded Funds, and Mutual Funds.
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How much of your salary should you be saving here in the UK?
There is no one answer that fits all or answers this question. We are all on different salaries, live in different areas of the UK with associated localised costs, and each have our own financial priorities. But regarding giving a “universal” answer, the 50/30/20 rule, as discussed earlier, is a good guideline.
Where should you be with savings according to age?
In the how to save money in the UK debate, all financial experts agree that saving towards your future is key, and most recommend having enough savings to cover three months’ worth of living expenses. Some people have this sort of emergency fund set aside in an instant access savings account or Cash ISA.
The time it takes to withdraw money from your ISA depends on the type of ISA. Easy access Cash ISA withdrawals can be made the same or the next day, while withdrawal from a Stocks and Shares ISA can take between three and seven working days.
According to the Moneyfarm blog entitled – “Average savings by age in the UK: How much should you be saving?” – the table below indicates where you should be with your saving by age:
|At 30 years of age||£51,434||£4,172.80 (Millennials)|
|At 40 years of age||£124,911||£5,786.20 (Generation X)|
|At 50 years of age||£198,390||£11,918.50 (Baby boomers)|
|At 60 years of age||£270,010||£19,001.62 (Silent Generation)|
Key: Millennials – 24 to 42 year olds; Gen X – 42 to 54; Baby boomers – 55 to 73; Silent Generation 74+ – Ex the Finder website
The table shown above doesn’t make exact comparisons as the age groups are slightly different, but what it does show you when considering how to save money in the UK, is how far behind the actuals are when measured against the “should-be” targets.
If you do find you’ve fallen behind with the amount of money you’ve saved – it’s never too late. Have a quick read of the Moneyfarm Insights blog entitled “Best savings accounts for over 60s.”
How you can save money in the UK by creating and sticking to a budget
Whether you want to know how to save money for a house in the UK or how to save for your retirement, the best place to start is by creating a budget. It is an essential step on the way to answering questions such as, can I live on £1,500 per month, and how to save £10K in 1 year in the UK?
Once you know your annual expenditure, you can then set about making those all-important savings we discussed earlier and see what effect they have in terms of how to save money on bills in the UK.
But it all starts with creating a budget. It is the golden rule of saving.
If you’re already into money-saving, and you’ve got more than one type of ISA, one answer to how to save money fast in the UK is with a combine ISA transfer exercise. Transfer your ISA accounts to the best ISA based on performance. While it’s true that investments carry a degree of risk, it will make things easier to manage and has the potential to maximise returns on your investments.
What are some simple ways to save money in the UK?
A few simple ways to save money in the UK include budgeting, meal planning, using discount codes and vouchers, switching to energy-efficient appliances, and avoiding unnecessary expenses.
How can I save money for the future?
You can save money for the future by setting financial goals, creating a budget, automating your savings, using high-interest savings accounts, and investing in stocks, bonds, or mutual funds while taking your risk tolerance into account.
How can I stay motivated to save money and avoid overspending in the UK?
To stay motivated while saving money, you need to set specific goals, track your spending, automate your savings, visualise your progress, celebrate small wins, find accountability partners, avoid temptations, and remind yourself of the benefits of saving money, such as financial freedom and security.
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