How to save money in difficult times
Times might be tough and while the last thing you may feel capable of doing is saving some of your cash, it’s wise to put any spare money – however small – into a safe place.
New data out this week revealed many of us appear to be doing this as a way of preparing ourselves for the headwind likely to hit as the cost-of-living crisis mounts.
Indeed, experts advise having an ’emergency fund’ of at least three to six months’ living costs at al times – and this is particularly important during the current environment.
According to the Bank of England’s latest Money and Credit report, £6 million was deposited into savings accounts in March 2022 compared to a monthly £5.5 billion on average which people were tucking away in the 12 months leading to the start of the pandemic.
Rosie Hooper, chartered financial advisor at Quilter, said these figures suggested the nation was bracing for a significant squeeze on their finances by putting more money into savings.
She explained before March there was a downward trend in the amount being deposited into savings accounts.
However, come March 2022, £6 billion flowed into savings accounts compared to a monthly £5.5 billion on average during the 12-month pre-pandemic period up to February 2020.
Rosie said “But this still pales in comparison to how much people were putting away during lockdown when there was little to spend spare cash on.
“It’s no secret that with inflation running riot and interest rates on the rise Too households are going to be struggling with their finances more than ever and it is wise to try and put money into savings during these difficult times if at all possible.
Here Rosie has offered some tips on how to boost your savings
Understand your incomings and outgoings
Take a look at what you have coming in each month and what comes out of your account in terms of bills and payments.
This will give you an idea of what might be possible when it comes to saving, or if you need to make any cutbacks to make ends meet.
Create a budget
Get your financial position for a normal month written down on paper. You are more likely to stick to a budget this way, allocating specific amounts for specific things.
This can also be easily altered as and when your circumstances change.
Have an emergency rainy day fund
While we like to save for something in particular you should make sure you at least have a rainy day fund in case of emergencies, such as a broken boiler or car repairs.
Aim to have three to six months of expenses in this pot, and be sure to top it up should you need to dip into it.
Consider investing for the long-term
Once you have built up a decent savings pot you should consider creating an investment pot for longer-term savings.
Putting money to work in the stock market for five years or more gives it the best chance to grow at a greater rate than inflation.
The sooner you invest and the longer you do it for, the more likely you are to have the potential for healthy returns regardless of short-term blips.
There are many services out there that will help get you started.
Seek professional advice
If you are in a position to speak to a financial adviser. They can help create a financial plan tailored to you that will help see you through the ups and downs, while also tweaking it according to your real-time circumstances.
This ensures your money is working as hard as it can be. Other services such as Citizens Advice or Step Change can help you with debt advice, while there are a number of websites out there with great guidance to get you started on your saving journey.