Simple steps to savings success
“When I was young I thought that money was the most important thing in life; now that I am old I know that it is”. Oscar Wilde
It’s the lifelong challenge we all face – how much money should I be putting into savings?
Whilst there is no recommended amount, some argue that 10% of your annual income should be put aside for a rainy day. However, without knowing when or what the rainy day is, you can never really know if you are saving enough.
To determine how much savings you should have, it is sometimes easier to take a step back and set yourself a target. What is it that you are ultimately putting aside these savings for? Why not research the average cost of what you are saving for and start setting yourself some small goals to help you achieve your required saving amount?
For example, based on research by The Co-operative, the average cost of getting a young person driving in the UK is £4,489 This includes the costs of obtaining a provisional license, tests, car and insurance. Therefore, you can use this as a ballpark figure as your savings goal to help ensure your children have the funds behind them to start driving.
Saving for inevitable life events including retirement is recommended. For example, research indicates that the cost of living has increased over the years. Even dying isn’t cheap, see the average cost of a funeral.
Steps to successful savings
- Once your goal has been established, it is easier to commit an amount each month to help you achieve the set figure. However, many families struggle to save without proper budget management and the right resources
- Calculate how much of your household income is being spent on necessary items. This will help you work out how much money is left over in order for you to save
- Set the time limit, do you have 4 months or 10 years to accumulate the savings?
- Use an online savings calculator like the one from www.adviceguide.org.uk to estimate the amount of money that you need to save on a monthly basis
- Choose your savings account. Will you be using an ISA account or do you have an existing regular savings account you can use?
- Inform your family of your plan. Maybe they can all help you achieve it by either contributing or being more sensitive to your financial goals
- Start saving!
For more advice on money management and savings, The Money Advice Service has a range of tools that help individuals and families manage their household budgets.