Whether it's towards a deposit for a car, a renovation at home or a holiday, saving is no easy feat. Savings experts have revealed their top tips on how you can save up to £5,000 in 2023.
Lucinda O’Brien, savings expert at money.co.uk, said: “As much as we may try to put it to the back of our minds, money is something that can be a major source of stress, especially in the current economic climate. However, sticking to a budget in order to consistently save money could be a lot easier than you think.
“When building yourself a savings plan, the first thing to consider is what this money will be going towards. If it is for a first-time house deposit or retirement, then opening a Lifetime ISA is a good option to consider. This is because if your goal is to have £5000 put away each year, you actually only need to save £4000 of your own money. The government will add a 25% tax-free bonus, meaning savings of £4000 will automatically be topped up by an extra £1000 each year. This is ideal if you’re wanting to save £5000 exactly as the maximum you can deposit into a Lifetime ISA is £4000 a year.
“Be aware though that money from a Lifetime ISA can only be withdrawn if you are buying your first house or if you are over the age of 60. If you want to withdraw the money for other reasons, the government will take 25% of the money you withdraw and it could cost you more than the government added in the first place.
“The 50-30-20 saving method can also be useful. This method involves allocating 50% of your monthly salary to needs (housing, food, bills), 30% to wants (gifts, dinners out, socialising), and 20% to your savings. If you were to take home £2,090 a month and use this method, you would save £5,016 by the end of the year. It is best to put this 20% away as soon as you receive your monthly paycheck, as you will then have less temptation to dip into it. A regular savings account would be a good option for this type of saving method as there are high interest rates. For example, the Yorkshire Building Society Regular saver allows you to deposit up to £500 a month, and offers a 5% variable interest rate. However, only open regular savings accounts if you are confident that you can stick to similar-sized monthly payments.
Lucinda has also provided extra money-saving tips that can help contribute to a savings goal of £5000 a year:
Participate in the envelope challenge
This method involves writing the numbers 1 to 100 inside 100 different envelopes and each week 2 random envelopes are picked. You then have to put away the amount written on the inside of each; for example, if you picked 20 and 7, you would save £27 that week. If you stay consistent, before the end of the year you would save £5050.
Get cash savvy
If you have a rough idea of your weekly spending, withdraw this amount of cash at the beginning of each week and leave your debit card at home. It would also be wise to deactivate Apple or Google Pay if this is something you regularly use. This way, you will avoid making unnecessary purchases, and any money you have leftover in the bank at the end of the month can be deposited into a savings account. Another benefit of spending with cash is that you can easily tuck away any notes or coins that you are given in change at the end of a shop for savings. At the end of the year, release the cash from your pot and add it back into your savings account.
Read your receipts
An alternative way to save little and often is to keep your supermarket receipts and make a note of your “savings”, usually printed at the bottom of the receipt. These small multibuys or reduced item savings may only be a few pounds at the time, but if you hold yourself accountable and actually deposit these savings into an account every time you shop, the numbers will eventually add up.
Open up about your goals
Telling your friends or family about your saving intentions will hold yourself accountable. You could ask them to check in on your progress every month, encouraging you to keep up to date with your payments. Similarly, simply having an open conversation with loved ones about your financial situation means that they can be supportive when you might need it most.
Kick the bad habits
If you’re looking to start your savings journey in the new year, why not combine this with your new year's resolutions for added incentive? For example, if you wanted to quit smoking or swearing, every time you find yourself giving in, deposit just £1 (or more) into a jar or easy-access savings account. That way you’ll have something to show for if you fall off the wagon.
Try a no-spend weekend
Try a ‘no spend weekend’ once every other month, which could include games nights, free museums, a hike or an at-home spa day. You could also try using up any leftover food from the week to keep your weekend completely spend-free! You could also spend your weekend starting the 1p challenge, involving saving 1p on day one, 2p on day two, and so forth till day 365. By the end of the year, you could make over £650!
Switch up to discounted items
When doing your weekly shop, visit the reduced section first to see if any items can be crossed off your list. Similarly, when shopping for fruit and veg, look out for the ‘wonky’ products. These are typically foods that might not be as aesthetically pleasing, however, they taste just the same and are sold at a lower price point than ‘normal’ fruit and veg.
