Saving money may be the farthest thing from your mind right now as millions of households balance their budgets to meet increasing costs of food, fuel, energy and more regular monthly outgoings.
However, despite the rising cost of living brought about by soaring energy bills and record-breaking inflation, with a fair bit of preparation it is still possible to plan and save for your personal goals - even if it might take a little bit longer to get there.
Clare Framrose, Head of Savings at Atom bank, shares her top tips for achieving the UK’s top six most popular savings goals.
Six ways to save during cost of living crisis
Whether it’s for a holiday, mortgage deposit, wedding, starting a family, being your own boss or just keen to give yourself a bit more financial stability, Clare Framrose covers them all.
Saving for a holiday
According to research conducted by Atom and VYPR last year, going on holiday is the top reason that the UK feels compelled to save.
Over the last few years, holidays in the UK have been the standard getaway for many, but, with the red list now a thing of the past, the travel industry is fully heating up.
With the average holiday costing around £1,567 per person, according to American Express survey data, it’s important to save little and often in order to secure your dream break.
Clare advises: “The first step to saving up for a holiday is deciding on your dream destination, whether that’s a romantic getaway to Rome, a family trip to Spain or a solo trip to the Savanna. Knowing where you’re aiming to go, and therefore a price bracket to aim for, will help motivate you to get there.
“I’d suggest making a list of all the things you’ll need to pre-pay for, such as flights and accommodation, plus how much spending money you’d need, then add all of these together to give you a holiday savings goal. For the average holiday cost of £1,567, you’d need to pop away less than £5 a day to achieve your goal in under a year.”
Saving for a house
Atom’s research found that one of the top reasons that people tend to save throughout the year is for a house and, with the average house price coming in at £264,000, or a 10% deposit of £26,400, it’s certainly no mean feat.
Paul Elliot, Head of Mortgages at Atom bank, shares a few pointers on where to start.
“When starting to save for something as big as a house, it’s important to be realistic with your time frame so you don’t get disheartened,” Paul said.
He continued: “First things first, decide on your budget - not only the amount you could save for a deposit, but also the amount you could afford to spend on mortgage payments each month, to work out a clear budget for your future home. Once you have that figure in mind, cross-reference it with your current monthly income and expenses and work out the amount you can comfortably put aside each month and, therefore, how long it will take you to achieve your end goal.
“Make sure you’re paying yourself first each month and sticking to the monthly budget you’ve decided on. It’s also a great idea to keep your savings account in a different bank from your current account to diffuse some of the temptation to dip into it.”
Saving for a wedding
Having dream wedding plans is all well and good, until the bouquet bills and buffet costs start rolling in. With the average cost of a wedding mounting up to a staggering £31,974, it's important to have a steady saving strategy in the lead up to the big day.
The wonderful thing about wedding planning is that you’re not on your own, between yourself and your partner you can share the responsibility of saving.
Clare suggests: “Start with a clear budget for each item you’ll need to spend on for your wedding based on what is most important to the two of you - as well as having an overall figure to aim for, this should help you track your spending on individual items without getting carried away. After you’ve agreed on your priorities, divide up the wedding costs into categories and agree on how much each of you will pay.
“A fun wedding planning challenge could be to task yourself and your partner with saving the most money within your respective categories while still achieving your dream wedding. A bit of healthy competition is always a strong incentive.”
Saving for a family
Though it’s dependent on a whole host of circumstances, experts say that, on average, the first year of a child's life could cost £11,498. When talking long-term, the cost of raising a child from birth to 18 can reach £150,753 for a couple and £183,335 for a single parent.
Clare explains why it could be beneficial to create a financial buffer beforehand.
She said: “Like anything, practice is key - even when it comes to saving for your family. Start by estimating the ongoing costs you expect to pay after having a child and then act as if the baby has already arrived - this way you can start to factor that figure into your cash flow beforehand.
“You don’t have to physically spend the money, but shifting it into a fixed saver account means that a steady flow of cash disappearing from your current balance will start to simulate what providing for a family might look like. Not only will you start to get comfortable with your new budget, but you’ll also save for your family at the same time.”
Saving for financial security
Atom’s research found that ‘securing for the ‘future’ came a close second to holidays, as the main motivation for people to put money away.
Clare explains: “Making saving part of your monthly routine until it becomes a habit is the best way to save for the long term. Set up regular transfers to your savings accounts the day after you get paid and watch the money build up over time.
“A longer-term fixed saver account would work best for a pot for your future plans, from raising children to early retirement. However, it’s also a good idea to set aside a percentage in an instant saver account - this way you’ll also have easy access to some funds, in case of unexpected emergencies.
“I’d recommend doing a little research into your own financial situation to help you work out a rough figure to aim for. For example, 3 months’ worth of your usual living expenses could be a nice sum for an emergency fund. Once you have a figure in mind, it should be easier to steadily aim for it.”
Saving to start your own business
According to HP, the average start-up spends £22,756 in the first year of operating - this, of course, varies depending on business type and can be offset if your business becomes a success.
Clare advises: “Before branching out on your own, I’d suggest trying to set aside at least six months of living expenses beforehand to see you through in case you need to put any profit you make back into the business in those first months.
“Starting a business is a huge leap of faith that can have massive returns if you play your cards right, so in the lead up to making the jump, lower your monthly expenses as much as possible by cutting down on luxuries such as holidays abroad and meals out. If owning your own business is your dream, it will be worth it in the long run!”
For more information on savings, visit the Atom bank website, here.
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