Essential Tips When Saving

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Saving is something we all know that we need to do – and that a large chunk of us need to do more of. It’s said that about 60 per cent of us have less than £1,000 squirrelled away, whether it’s for a rainy day or a brighter future.

What if you want to change that? Here are some essential tips that you must bear in mind when looking to boost your savings:

Have a goal

Think about what you are saving for. If you want to be able to afford a big ticket purchase – a house deposit, holiday, car, etc – then make sure you know how exactly much you need and how long it’ll take you to get there. This will shape your thinking when it comes to choosing the right account.

If, like many people, you just want to be able to put aside the maximum amount possible then make sure you have a thorough poke through your outgoings, cut any unnecessary expenses and work out how much you can safely tuck away. For every bill you cut or subscription you cancel, divert the dividend directly into your savings to put the money to good use.

Shop around for better rates

One reason people often give for not saving is that interest rates are sluggish. The Bank of England base rate is at an all-time low and where you used to be able to find accounts that paid out upwards of five per cent – the reality now is that most banks and building societies are quoting rates below half that amount.

It shouldn’t put you off entirely, though, but doesn’t mean that you have to be careful about choosing the right deal. That means you might need to lock your money away for longer – or search out an account that requires a regular monthly payment. Often this proves to be well worth doing in the long run. Money saving guru Martin Lewis has sifted through the best account for individual savings circumstances here. It’s well worth exploring these options.

Diverse portfolio

The cliché ‘don’t put all of your eggs in one basket’ is actually pretty true when it comes to saving. If you’ve got enough money to be able to look at two or three different products, then you should – that way your efforts won’t be completely undermined should they not bear fruit as you’d hoped.

Serious investors will look to the stock market, savings accounts, property and commodities to vary their portfolio accordingly. Pick the ones that you are comfortable with to help make the most from your money.

Understand what you’re investing in

On that point, it’s also important to understand what any investments you make will entail. There are plenty of resources out there to help if you’re asking ‘what is spread betting?’ or ‘how do I track the price of gold?’. Get yourself fluent in the language of money before you take on any of these products.

Investments in the stock market do carry a risk – and the greater the risk, the greater the potential reward. Yet this reward is worth pursuing, provided you know what you’re talking about and what you’re getting yourself into.

Understand the new tax rules

You’re probably familiar with the tax-free savings perk of putting money into an ISA, but it’s also important to note that, as of April 6 this year, the ‘personal savings allowance’ has changed the rules for other savings accounts.

People who pay the basic rate of tax (20 per cent) can earn £1,000 in interest tax free. That falls to £500 for those who pay 40 per cent tax and top rate taxpayers have no allowance so it’s important to understand where you sit on this spectrum.

However, it’s also important to realise that interest from ISAs and premium bonds – the traditional tax-free options – don’t count in this, so there’s an opportunity to take this interest tax free too.

Guaranteed savings

One last thing to consider. After the 2008 banking crash, all UK-regulated banks and building societies have to guarantee £75,000 worth of savings. That should give you peace of mind in knowing that your money is in a safe place should the world enter further uncertain economic times.

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