How to...start saving regularly

by Leeds Building Society


One of the biggest financial challenges people face is regularly putting money aside. In a recent survey, we found that 23% of adults put less than £40 in their savings account per month.1

According to the survey, saving is particularly difficult for younger people, many of whom will have aspirations of buying their first home. But to save an average house deposit2 within five years, a single first time buyer needs to be saving £350 a month.

Here are a few tips to help you get into the regular saving habit.


Figure out how much you can save

If you're serious about saving regularly, you need to figure out a realistic amount to put away every month.

To do this, you need to list all your incomings and regular, fixed outgoings, like rent, travel and subscriptions. Then estimate how much you spend on variable costs like food and leisure.

You might be able to save what's left.

Make saving a habit

When saving becomes a habit, it's a lot easier to stick to it. If you save money on an ad-hoc basis, you're forcing yourself to make an active choice to do something sensible everytime you save money, and this drains your willpower.

The trick is to make it a habit. Save a fixed amount every month, and save it at the beginning of the month, rather than trying to spend less throughout the month and putting the leftovers in a savings account.

One way to make this easier is to...

Automate your finances

The less effort you have to put into saving every month, the easier you'll find it. Set up a standing order to your savings account (preferably on the day you get paid, if you earn a regular salary).

That way, you'll get used to the money leaving your account. Before long, you'll forget about the transaction, and your savings will build up more quickly than you'd think.

Factor in all of your regular outgoings and set up standing orders for each one. Then, each month, your money will come in, your savings and expenditures will go out, and you won't even have to think about it.

Find the right account for you

The tempting thing is to go straight for the account with the highest interest rate, but this may not always be the best option for you.

Many savings accounts have minimum or maximum monthly payments. So, depending on how much you can afford to save each month, some accounts might not be suitable.

There are accounts on the market specifically designed to encourage regular saving.

Depending on how much you want to save up, an ISA could be a good option, although it's worth bearing in mind that with the new Personal Savings Allowance all savings accounts earn some of their interest tax-free*.

The most suitable account may also depend on what you're saving for. If you're looking to save for a deposit on a house, for example, you might benefit more from the govermnent's Help to Buy ISA, which helps first time buyers build up a deposit by contributing an additional 25% of what you've saved when you come to pay for your mortgage deposit.

Understand interest

With most savings accounts, you can earn "compound interest" on your savings. This refers to the interest that's earned on interest. It works like this:

In the first year, the money you put in the account will earn interest. That interest will be paid into the same account, further topping up the savings.

If you leave this interest in your account, next year that money will also earn interest. So the more money you save, and the longer you leave it in your account, the larger the amount you'll earn from interest payments.

Once you get your head around compound interest, it can make saving regularly and for longer periods seem a lot less daunting, and a lot more rewarding.

Not all savings accounts pay the interest back into your account. If this is the case, compound interest won't apply.

Follow these tips and you could be well on your way to developing a healthy savings habit.

1Based on a nationwide survey of 1,000 respondents conducted by Leeds Building Society in May 2017

2Office for National Statistics, "Statistical bulletin: House price statistics for small areas in England and Wales", Mar 2017

This information does not constitute legal or financial advice given by Leeds Building Society. No reliance should be placed on this guide and you must make your own decisions. We recommend that you seek legal and/or financial advice if you have any questions or queries.

Cash ISAs are available to individuals aged 16 and over who are resident in the UK for tax purposes. Leeds Building Society only offers Cash ISAs.

The maximum you can invest in a Cash ISA for the 2017/18 tax year is £20,000 less any amount invested in a Stocks and Shares ISA and/or an Innovative Finance ISA in the same tax year.

*Tax-free means that interest payable is exempt from income tax.