What are savings?
- A savings account is a place for you to put money in and earn interest.
- Long term savings: money you don't expect to need to spend within the next 5 years or less. This can be for a pension or a child’s education for example.
- Short term savings: money used within 5 years. This can be used on a one-off purchase such as a car, a holiday or a wedding.
- Emergency savings fund: for unexpected costs or circumstances. Aim to save 3 months of basic living expenses based on your budget.
Why should I have savings?
- For emergencies or unexpected life changes. If you suddenly lose your job or your washing machine breaks you can avoid potential debt.
- For a deposit on a house.
- For expensive purchases such as a car, holiday, or luxury items.
- For retirement.
- For Christmas and Birthday gifts.
How can I save money?
- Create a realistic budget based on your current circumstances. Do you have any money left after all your expenses?
- Look at all areas you spend money on and see how you can reduce your spending.
- Create goals using savings tracker: Work out how long it will take you to save for an expensive item you want based on how much you have left after bills and normal expenses.
- Make it automatic: Set up a Standing Order to transfer money into your savings account on the day you are paid.
When should I save money?
- If you've got debts including credit cards, doorstep lenders, arrears on priority bills or a mortgage, overpaying often beats saving.
- Put savings into your account when you get paid, or have a standing order set up for this automatically.
Where should I save my money?
There are different types of accounts where you can place your savings and choosing where to save them should depend on your circumstances.
- Easy access or flexible accounts: If you need instant access to your money.
- Fixed rate accounts: Lock cash away in return for higher fixed rates.
- Lifetime ISA (Individual Savings Account) to save for your first house or save for later in life gives a 25% boost on up to £4000 per year.
- Help to Save scheme gives a 50% bonus to those on welfare benefits.
- A cash ISA is useful if you pay tax on savings interest.
- If you're able to save monthly, regular savings accounts often pay high rates on small amounts.
- If you're saving for your kids, children's accounts often pay better rate.
- Credit Unions have saving schemes.
Help to Save
If you're on a low income, you might qualify for a government-backed scheme called Help to Save.
It’s a type of savings account that gives a bonus of 50p for every £1 you save over 4 years.
If you live in the UK, you can open a Help to Save account if one of the following applies:
- You’re getting Working Tax Credit
- You’re entitled to Working Tax Credit and are getting Child Tax Credit
- You’re claiming Universal Credit and your household earned £617.73 or more from paid work in your last monthly assessment period
If you would like more information about this scheme, please click here.