Putting a price on financial security
Are you better off than you were in 2009? With all the talk of low interest rates and stagnant wages, you might think the answer to this is obviously no.
However, when it comes to savings in the bank some of us do have more money, according to research by Nationwide. It reckons 49% have more savings now than in 2009, but they don't feel financially secure until they have a hefty £21,000 in the bank.
This might seem like an unreachable amount of money, but even aiming for a smaller amount means you'll have something to fall back on in an emergency. And as Money Advice Service research shows 16.8 million people don't have as much as £100 in savings, putting away something is definitely better than nothing.
Importance of savings
Yet Nationwide's research shows 71% of savers are not fussed about getting interest on their money. They do it simply to have a nest egg if they need some cash in an emergency.
Money Advice Service's Nick Hill suggests four steps to get you in the savings habit:
1. Choose ways to save which are right for you
Even starting small can make a difference. For you, this might be cutting down on spending in certain areas, perhaps trading down from premium brands at the supermarket or cutting back on daily coffees.
It might even be taking a good look at any unused items around your home to see if any of could be sold to make a bit of extra cash.
2. Set yourself a goal
The sum of £21,000 might seem like a daunting target, but when we challenged people to save £100 a month, all were surprised at how much they could save, and in fact many saved more than this.
Having something put aside in case of emergencies is very important. What this amount is depends on your situation. We would suggest at least three months of outgoings.
Once you know how much you want to save, think about how much you could realistically afford to put aside each month.
Once you have these targets in your head you'll find it's much easier to reach your goal.
3. Make it a habit
Set up a dedicated savings account and a direct debit and treat your savings like any other monthly expense. This way putting money aside will seem like less of a sacrifice.
4. Keep track of your growing savings
Around 68% of people don't know what interest rate they are getting and 20% have never changed their savings account, according to Nationwide's research.
Make sure you regularly review what interest rate you are getting from your bank as these can change. If it starts to go down, shop around for a better rate using online comparison sites.
This article is provided by the Money Advice Service.