At this age there are so many people moving out and getting their first properties so this post is focusing on how to save up effectively.
I did things a bit differently to most people in that I made a decision to update my wardrobe and purchase my car and THEN start to save seriously. You might be wondering why I did such a thing, but there was a logic behind it. I knew that having a mortgage was going to be a big expense so I wouldn’t be able to splash out on luxuries so easily. Also, buying a car meant that I didn’t have to pay such a large sum for travel (London Underground Travel Cards are so unbelievably expensive) and I would have something to transport my stuff in – meaning I did not need to hire out a van.
Now I’m going to go through some of the steps I took to saving up.
Be intentional about how much you plan to save each month!
My monthly targets were a bit excessive because I was trying to save up very quickly. However, if I saved at least £500-700 a month then that would lead to between £6,000-£8,400 for the course of one year. That doesn’t include the interest you would contain on that amount.
You also have to think strategically about this when you are saving up. One way to do it is to set up a Direct Debit that takes place on your payday so that you don’t even notice the money that is coming out of your account. So if I’m paid on the 30th of every month, I will set up a Direct Debit of £500 to automatically leave my account every month on that date. Or even on the day after. That means I don’t even have a chance to think about spending that money.
Having an ISA
Interest, interest, interest.
Whichever ISA you decide to go for (as there are so many options out there), ISA’s are a great way to save large amounts of money and gain interest on it. I tend to move the money from my monthly targets to my ISA if it is a large amount and then continue to save again. This means that the largest pot of saving is in the ISA – the very thing that obtains the most interest.
If you are with a good bank too they will tell you about opportunities to increase the amount of interest you earn on your ISA and the better deals that are out there for you. My advice regarding ISAs is to read up about the different deals banks are offering and take the one that is most suitable for you. Also check if there are any fees for withdrawing your money or if you can move large sums about when you do eventually decide to purchase your property.
Now, by this, I do not mean the Lifetime ISA. I just mean a standard savings account. This account should be where you put aside a small amount of cash every month knowing that you will never touch it. It becomes like a little insurance pot of cash should you ever desperately need it.
The amount to put in this account solely depends on you and how much money you want there for rainy day. It is less rigid in the amount that needs to be paid in but should be contributed to on a monthly basis.
For example, one month I might put in £50 where as on another month I might put in £200. It all depends on you. But this should be money that just accumulates over time – without you touching it. It’s only there for emergencies and should just gather interest.
The Good Old Money Jar
This tip is something I learnt from my dad and my grandma. Having a jar of money in the house is so important.
My dad also told me a great way in which you can ensure you are adding money to the jar often. How it works is you think about how much you spend usually on lunch or during the course of the day and take out that amount in cash. I tend to make my lunch and bring it in rather than spend money on lunch every day so I draw out what I might spend on snacks etc (probably about £20-30).
Then whatever change you have left from the day based on how much you spent, you put that in the money box.
Let me break it down a bit more. If I have £25 spending money for food/snacks that works out to £5 for every day of the week. I’m not talking about a weekly shop here, just extra stuff.
When I get home that evening I look in my wallet and check how much of that £5 is left. The change then goes into the money box or in some cases the whole £5 goes into the money box because I haven’t been to the shop that day.
This is a great way to save up for smaller things pretty quickly and for me I use the money jar technique to save towards buying small things for my apartment. It requires discipline but it’s so much fun counting up how much you have saved in a short space of time. Again, the key here is to not spend any of the money you are saving, you have to ignore it as if it’s not there. The only time you remember the jar is when you are putting money into it or counting it to see if you’ve reached your goal.