Saving is one word that people hear many times when it comes to personal finance and money matters. National Savings & Investments (NS&I) found that UK savers have put more money away in 2014 than they have in a decade. The NS&I noted that this was around 8% of pay. The average amount that is saved per person each month is around £113, according to the NS&I.
These new trends highlight that savings have become more important for people in the UK. The recession and pressure on people’s personal finances has completely changed how people approach savings. Saving has become more important and clearly Britons are reacting by saving more cash.
The NS&I survey found that over 70% of people who said they were saving were not doing it for a specific reason. They noted that they were saving because it was ‘the right thing to do’, according to the NS&I. 42% of people who said they were saving for a reason said that they were saving for a holiday. Holidays are woven into the fabric of British culture where it is a staycation in the countryside or a weekend trip to Spain. The passion to save for holidays has remained consistent despite turbulent financial times. If you are saving for a holiday, you are in good company but just make sure that you also have an emergency fund of cash to get you through the tough times.
The subject of emergency savings still had people in a bind. Of the NS&I survey, 29% said that they did not feel that they had enough emergency cash saved away. Emergency savings continue to be a tough challenge for many people to overcome for many reasons. The increase in price of household goods is a barrier but also a tough job market is making it tougher. It is critical for people to save as much as they can for their emergency fund.
What are the key barriers preventing people to save in general?
- Spending on other things: One of the biggest barriers to saving is spending disposable income on things like eating out as well as buying clothes often. These are important but if you are spending too much money eating out, you can cut that by a third and redirect that cash into personal finance savings.
- Making saving a routine: Most people save in a random way when they are inspired to save. However, when the reality of being consistent sets in, it can be difficult to remain focused on saving money. One way to approach this problem is making it a routine. Having a standing order of savings that goes straight from your bank account into another bank account is one fantastic way that you can teach yourself how to save like a clock. Making saving a routine lessens the pressure of saving and then falling off the wagon and having to re-energise yourself again to save.
- Employment: Losing your job can destroy attempts to save. Whether you leave your job voluntarily or if you are made redundant, you need to be employed in order to save.
What can improve chances of saving more money each month?
One way to increase your savings includes creating new income streams. This could include getting a part-time job or it could also include doing consulting work. The more money you can put towards savings, the better financial shape you can put yourself in to deal with life’s challenges.
Top things you can do to save more money
- Find friends who are saving: One place where we learn a lot of our financial behaviours is from our friends. Your friends can definitely inspire you to save money if you see them saving all of the time. It is critical to have friends who are trying to improve their finances and one way to do this is through saving. You can try and encourage each other to save every so often or you can do it on a schedule.
- Have a goal: As the NS&I survey shows, going on a holiday is a powerful goal that inspire many people to save as much money as possible. 49% of people surveyed said that they were saving for housing costs such as paying for a deposit on a house. Buying a home is one of the most popular decisions for people in the UK, and this is a decision they are supporting by saving as much cash as possible.
- Create passive income: Income that you receive from investments for example can be re-invested as capital for savings. Creating passive income can be difficult but it can also be achieved if you focus and look for ways to save more money. One way to create passive income is to rent out property such as renting out a garage, parking space or renting out a flat that you own.
- Don’t spend excessively: As the old saying goes, ‘cash is hard to make, easy to spend’. You need to monitor what you are spending to avoid losing money that can be used for savings. Excessive spending can include eating out frequently, drinking coffee outside of your home every day and going out every weekend without looking at your budget. By minimising just one area of your spending, you can instantly put the money that has been saved into other areas such as saving for a house, saving for going on holiday or saving to buy a big one-off purchase that is important to you.
Saving requires focus, energy and looking into the future. Short-term thinking such as what you can buy today or what you can get today will impede your ability to save. If you want to save, you need to make a plan that you will follow to the letter in order to save effectively. Here is another good post to see if you are a saver or a spender.
NS&I research also found that people approaching the age of retirement (55 years+) said that they had less than £1,000 in savings. This highlights the importance of creating a solid plan that you don’t stray from to save as much money as possible so that you can plan properly for retirement.
Are you a saver or spender? Let us know!