What's your reason for saving?
Are you putting money aside each month? If so you're not alone, with Money Advice Service research revealing 56% of UK adults save either every or most months.
However, it's not always easy to save as much as you'd like, especially at Christmas. More than half (57%) of working age adults have less than one month's income in savings, while just over a third (37%) don't have access to £300.
But there are ways to help focus your saving efforts, and one of those to know exactly why you are saving rather than spending.
The top reasons for saving
A third of savers are saving to pay for a holiday, making it the most common reason according to the AA. Other top reasons include emergencies and a new home.
Why we save - the top reasons behind saving:
A holiday (34%)
A rainy day (30%)
Just in case (18%)
Retirement (18%)
Home improvement (16%)
A new car (15%)
A new home (14%)
Set a savings goal
Setting a savings goal really can help, and people who know what their plan is save faster than those that don't. Here's how you can decide what to save for, and the best way to do it.
Calculate how much you can save
Once you've paid for your essentials such as food, rent and bills, you're left with what's called discretionary income. That's what you've got to spend as you wish on your "luxuries", from nights out to new clothes – and it's where you will take any money for savings from.
If you need help working out what you have left after the bills, the Money Advice Service Budget planner is an easy tool to show what you spend and what's left over.
Try the Money Advice Service Budget Planner
Decide what you want to save for
It can be big or small, long term or short term. You can even have more than one goal.
To ring-fence the savings, it's worth setting up a separate account so you don't accidently dip into the money. There's no limit to how many accounts you can have if you want to keep the money for your different goals separate.
Get the highest interest
When you choose your savings account, make sure you are earning as much interest as you can.
You've a few options, the most common are ISAs (where the interest earned is tax-free) and savings accounts. You can get a better rate of interest if you fix for a year or longer, but that can mean you lose any interest you earn if you have to remove the money early.
Top tips for choosing a savings account
However, at the moment the highest interest rates are generally available in current accounts. You'll need to check the terms and conditions to make sure you qualify for these high rates, and you'll also be credit checked when you open them.
This article is provided by the Money Advice Service.
