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Look after the pennies and the pounds will look after themselves. You don’t need a lot to begin saving money. Small savings can grow into a considerable amount of money, if they are carefully managed.
Here are our tips to help you to create your savings plan, making small savings work for you:
Be in the money saving mindset
If you received £100, you might find it easy to set that money aside.
Smaller amounts of money are often harder to save.
It can seem like saving £5 or £10 is not as worthwhile, or that the £3 you spend on a coffee is ‘just spare change’, but these are the amounts that add up.
Saving £3 per week gives you more than £150 of savings over the course of the year, along with interest if it’s stored in a savings account.
Many savings accounts can start with just a £1 deposit.
Delayed gratification can be difficult. Often, it is easier to buy something that will make you feel good immediately. It is harder to save money, knowing that it can be used for something bigger or more important in the future.
Being in the money saving mindset means that you might forego that visit to the coffee shop, or skip the occasional takeaway night, to boost your savings account.
Make changes to your budget and lifestyle
Watch out for costly contracts
A mobile phone on a contract can provide such much needed predictability. It also may be the cheapest option if you use all your minutes, texts and data.
Usually, this is not the case.
With a pay as you go plan, you can set yourself a clear spending limit. You will need to have willpower, so that you don’t top up again if you run out.
Remember even without phone credit, your mobile can still be used for essentials such as incoming contact and emergency calls.
If you can set yourself a clear spending limit, then you could use your mobile phone for as little as £5 or £10 per month.
You could also consider a provider that fuses the benefits of both. GiffGaff allows you to use contract benefits, such as inclusive data, without the contract agreement. You can increase or decrease your top-up each month, to fit your financial situation.
Locking yourself into a contract, for your mobile phone or anything else, can mean that you are throwing money away.
Often, we sign up for annual gym memberships to get a cheaper monthly rate, but give up after six months. In 2011, Which reported that Brits waste £37 million per year on unused gym memberships.
By planning ahead and only signing up to contracts that you will use to their maximum potential, you can make small savings through the year.
Walk or use public transport
Walking is as good for your savings plan as it is for your health and the environment.
You’ll find few better cost cutting tools than your own two feet.
If you’re travelling further than your feet can carry you, then it may be best to climb aboard the bus.
The average driver spends almost £90 per month on fuel. That’s £3 per day. If you could completely get rid of your car, you would also save money on insurance, tax, MOTs, repairs and breakdown cover.
Switch to own brands
Supermarket own brands are cheaper than big names like Fairy, Andrex and Kellogg’s.
You don’t need to move to own brands and value brands for everything that’s included on your shopping list. Even switching a few products can make a difference to your shopping bill.
Often, there is little difference between own brand and branded products. This isn’t always the case, so be prepared to experiment a little.
With some frugal shopping skills, you can reduce your weekly bill and move the spare cash into your savings.
Learn to say no
It isn’t always easy to say “no” to yourself. It’s even harder to say it to other people. Increased self-control can lead to a better personal finance situation.
Say “no” to spending money on payday. Often, people find it hard to resist when their bank balance is at its highest.
Instead, set spare money aside. You can even set up a standing order, to automatically transfer your excess immediately into your savings account.
If you do want to indulge in some luxury spending, wait until you are nearing the end of the month. You will be more cautious with your money.
If a friend invites you out for a coffee, why not suggest a walk in the park instead? If you’re going on a night out, try sticking to soft drinks and skipping the end-of-night kebab.
Go on a selling spree
Instead of a shopping spree, you can declutter and sell your old belongings.
If you have things in your house that you no longer want, need or use, then put them on eBay or in a Facebook selling group. You can turn trash into treasure.
If you can sell just 10 items, for an average of £10 each, then you’ll have £100 to add to your savings pot. It doesn’t take long for the money to add up.
Store your savings in the right places
Learning a little about saving and investing can help you to make the most of your money.
Any savings that you have could be working harder for you.
Compare a variety of savings accounts, to see which offer the best return on investment.
An ISA provides a tax-free wrapper for your savings.
For big savers, or individuals that plan to be big savers in the future, this may be the best way to save money.
Yet, some savings accounts do offer higher levels of interest.
Your Personal Savings Allowance (PSA) allows you to earn up to £1,000 of interest, tax free, from any savings that you hold.
Most savers earn less than £1,000 in annual interest, so could be better off in the short-term with their money in a standard savings account.
Instant access savings
In most cases, instant access savings accounts pay lower rates of interest.
If you don’t need to be able to access your money instantly, you may earn more interest by locking it away for longer.
Some savings accounts have a fixed term. You will pay a high penalty if you withdraw money during this time, but will earn more from your money if you can hold out until the end.
Investing and taking risks
Many people with small savings choose not to enter into risky investments.
In fact, most types of investment require that you have a good chunk of money to start with.
Despite this, there are options available if you are happy to take a few risks.
You might choose to get involved in peer to peer loans. Your money will be used to provide loans to other people, and in return you may receive a higher rate of interest.
Your capital is at risk, but you could be earning more than 2.5% by investing your money for a year.
Keeping savings accounts with a separate bank
Most people use online banking.
If you have a current accounts and savings account with the same bank, then the
bank will make it easy to transfer funds between the two.
This can be a curse, rather than a blessing. Being able to easily transfer money from your savings can make you more tempted to access them.
If you do plan on opening a savings account, then it may help to choose someone new.
You can log in to check on your savings once a month, rather than seeing the balance every day whilst dealing with current accounts and bills.
It will be harder to take money from your savings, so you will be more likely to keep it locked away.
Having money with many banks may also protect you in the event of a system failure, when money becomes temporarily inaccessible.
Small savings: seeing opportunity everywhere
The key to making small savings work is in seizing many opportunities.
You do not need to go without, or restrict your spending to an uncomfortable level.
If you are mindful, you may discover that there are money saving opportunities just waiting for you each day.
Resist the chocolate bar that you’re about to put into your basket at the supermarket. Put the 50p in your savings fund.
Choose to walk to work, rather than driving a mile in your car.
Round every purchase up to the nearest full pound, then transfer the difference into savings. Some bank accounts have an option to automate this process.
Regularly check your budget, to see where you can cut back. Replace your costly gym membership with runs around the park.
Small changes can create big savings that you can rely upon for emergencies, or use for a family holiday. By looking to the future, you’ll find it easier to be in control of your savings plan today.
Small savings: your tips
How do you save money?
What do you do, to make sure than no spare funds go to waste?