Although we know this is difficult in the current climate, as we head into 2023 we thought it would be a good time to take a look at some ideas to be able to increase your savings. There has been a rise in interest rates which does mean that interest paid by banks on savings has increased too. As always we don’t provide advice but do like to highlight options for you to help in your savings goals.
Our top tip has to firstly be making a savings plan. Do you have a goal? Something to save for such as a holiday or are planning to pay off debt or just want to add to your savings? This is your first step!
Once you have settled on a goal then a great next step is to look at your income and outgoings. What are you able to save each month? A great rule we have always mentioned is, if you can, to spend 50% of your income on needs (housing, bills, food and travel for work costs); 30% on wants (your fun money) and 20% on saving. You should now have a monthly number/figure that you know you can comfortably save each month.
Now you have your goal and savings figure the next thing to do is decide how you would like to save the money and there are a number of options to do this.
There are instant access savings accounts, longer term fixed rate options too and there is also the option of paying off debt to decrease your outgoings and increase savings potentials too.
The Money Saving Expert website lists some great ideas on what savings accounts are available: (Savings accounts: 2.75% easy access or up to 5% fixed (moneysavingexpert.com).
Other options you can look at to try and save and/or earn a bit extra on your savings are:
1. If you’ve got debts or a mortgage, overpaying often beats saving
If you have a lot of debt, it always pays to clear it before saving. For example, £1,000 in top savings earns up to £20/year, while £1,000 debt on a credit card with an APR of 18% costs £180/year. Clear the debt with the savings and you’re £160+ better off.
Remember if you are struggling with debt the MoneyHelper website has lots of information and advice on what you can do and what help is available.
2. Need instant access to your cash? Go for easy access
Easy-access accounts let you make withdrawals when you need to (though some do limit the total number you can make a year). They tend to pay lower rates than many other types of account, but are a good place to keep your money if you’re going to need it soon (or frequently)
3. Lock cash away in return for higher fixed rates
A fixed-rate account is just a savings account where the amount you earn is set in stone over a fixed time period. However, you can’t usually access the cash during that time, and even if you can, the penalties can be large. Usually fixed rates are higher than easy access, but if normal savings rates were to increase during that time you’d be unable to ditch and switch to a better payer until your fixed term ended.
4. Wannabe first-time buyer? A Lifetime ISA gives a 25% boost, so should be your first port of call
The Lifetime ISA (LISA) scheme gives first-time buyers a 25% boost to their savings, and should be your first port of call if you’re saving for your first home. Anyone aged 18 to 39 can open a LISA and save up to £4,000/tax year into it, as a lump sum or by putting cash in when they can. Then the state adds a 25% bonus on top. So save £1,000 and you’ll have £1,250.
5. On universal credit or tax credits? Help to Save gives a 50% bonus, so smashes other accounts
The Government’s Help to Save scheme is designed to encourage people claiming universal credit or working tax credits to save. It pays a 50% bonus on the amount saved, up to a maximum bonus of £1,200 over four years. The Help to Save guide on the Money Expert Website has some useful information on the scheme, including when you should and shouldn’t go for it. You can also see here for more information.
6. A cash ISA is the likely winner if you pay tax on savings interest (most don’t)
The personal savings allowance (PSA) means that most people don’t pay tax on their savings. This means that deciding whether or not to put your money into a cash ISA is usually just a question of which account pays the highest interest rate. If you’ve used your personal savings allowance (£1,000 is interest if you’re a basic-rate taxpayer, or £500 for higher-rate), then it’s worth considering a cash ISA as you never pay tax on the interest paid on that.
7. Happy to open a current account? You can boost interest on small amount
Surprisingly, some banks’ current accounts pay a higher rate of interest than their savings accounts, though you tend to only get interest on the first £1,500 or so. Unlike savings accounts, you’ll need to pass a credit check to open one.
8. If you’re able to save monthly, regular savings accounts often pay high rates on small amounts
These are specific products that let you save about £50 to £500 every month (maximum deposits vary by account). The main advantage is they tend to pay higher rates of interest than standard deals.
Now you have your savings figure and have decided on the best way for you to save you should then be able to see how this can affect your overall savings goals for 2023. Good Luck!
Don’t forget, all that saving and paying off any additional debt will have a positive impact on your credit rating. Make sure you check out yours today, using our 10 day free trial (it’s just £19.95 each month thereafter). Sign up using the following link; www.scoresmatter.co.uk.
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