People always tell you that you should be saving but if you’re not sure what you should be saving for, it can be very difficult to get motivated.
Obviously, you may have personal aspirations that you’re working towards, such as a car or a nice bag, but there’s a lot of other reasons out there that may require you to rely on a lump sum of money that you just haven’t got.
Instead of telling you how to save, we thought we’d offer you some reasons why you should save. Not everyone will want to save for all of these things, but hopefully you can adapt the ideas and see how having clear, but achievable goals is the first step in saving successfully.
It’s easy to think of a rainy day fund as a pot of money to spend when the weather is terrible you and want something to cheer you up. But really, a rainy day fund should be used as an emergency backup for when a long term financial difficulty comes up. For example, if you get made redundant at work or perhaps if you split up with your significant other and have to pay increased bills for a short period of time. Usually, the reason for needing a rainy day fund is not a positive one (hence rainy rather than sunny), but it can be a life saver when you need it most. It’s good to aim to have around 3 months’ worth of salary in your rainy day fund. You don’t need to save it up immediately, but it’s a good idea to put any spare cash away each month with this target amount in mind. Once you reach it, you can start putting money towards something else, safe in the knowledge that you have about three months of bills/rent/food covered, if something terrible should happen. It’s also a good idea to keep this money in a locked savings account or at least an account where you don’t have a card so that you aren’t tempted to spend the funds on small purchases or bills that you could cover with your usual monthly income if you just budgeted a little better.
Unfortunately, this doesn’t mean a designer pair of shoes. At different stages in your life, you will want different things. But it’s good to separate the things you want for instant rewards, and the things you want for long term gain. The latter is what this saving goal is aiming towards. Whether it’s a new car because your family of two is about to become a family of 3, or maybe your not-so-little one has moved out and you can downsize, these kinds of purchases might not be necessary, but may make your life easier in the long run. Other reasons to save a large amount of money could include getting a degree or maybe enrolling in a course for higher education which will benefit your career and help you navigate the promotion ladder. Although the benefits may not be immediate, having an extra qualification will never hold you back.
Whether it’s your first home or you’re just moving to a new house, no-one can deny the extreme costs that buying a house entail. Even if you have sorted your mortgage and you’ve saved for a deposit, there are other costs involved which might not be immediately obvious. For example, if you are buying your first home, you may not be aware that there are additional fees to just the price of the house. Stamp duty, solicitor fees and paying for surveyors can all eat into that all important deposit if you haven’t planned ahead. The best thing to do is speak to a parent or someone who has already done it and find a list of all the things you’ll need to save for. Usually anywhere between £5k-£10k will cover these additional costs, and if you’ve already got the money saved, then it’s something you won’t need to worry about.
If you are just moving to a new house, you’re probably aware of all of these extra fees, but things like extending the leasehold on your property or simply the cost of removal vans can go unacknowledged in the mix of paperwork and transactions. Always save a little more than you think you need if you know you are intending to move to a new house in the not too distant future.
We agree that no one really wants to think about their pension, especially if you have already set up your pension payments at work, it can easily be something to put out of your mind. Unfortunately, however, paying in the bear minimum might not be enough to finance your life after retirement. You may need to start thinking about other ways you can save towards your pension.
As this is a very long term saving goal, and one that will take a very long time to achieve, it can be easy to put it off and sort it out at a later date. But the longer you leave it, the less money you’ll have when it comes to retirement. It may be that you start investing, or that you simply open a lifetime ISA; either way, retirement is a great goal to start saving towards at any age. So, if you’re really struggling for a reason to put that extra cash away each month, at least you can start with this one.
Unfortunately, money doesn’t grow on trees and sometimes we really, really wish it would. If you can find even a spare £10 in your monthly budget, try putting it in a jar at the end of each month so you can treat yourself and your family to something nice at the end of the year. Whether it’s a family lunch or even matching pyjamas to wear on Christmas day, having a little pot of gold to share, even when times are tough, can be the light at the end of the rainbow. It’s not a big saving goals, but it’s one that will be enjoyed by everyone involved and that can sometimes be the inspiration you need to start saving for something bigger.
Saving can tricky regardless of your salary, but inevitably it can be harder if you’re living paycheck to paycheck. Even if you have managed to save a good amount of money, sometimes you don’t want to spend it on unexpected bills or small surprise costs throughout the month. Polar Credit offers a solution to short term financial problems. A credit line is a revolving credit facility that allows you to withdraw cash when you need it and repay it as your financial circumstances allow.
More questions? Check out our FAQs section.