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Saving for the future

The pandemic has created a savings stampede, as households shore up their finances. The Household Saving Ratio is the percentage of disposable income that is saved. In 2019, the saving ratio had fallen to a near 50-year low (5%). It should rise to around 17% for 2020 (high). How can I save my money?

piggy bank

It is a good habit

You cannot change the amount money coming into you back account, but you can change how much goes out. A simple way to save is to set up a standing order just after payday so that you automatically add a little bit each month to your savings account - £25 per month is £300 per year.

Saving v Investing

Saving means putting money aside without risk and with the chance to earn interest. Investing is different from saving because it involves a greater level of risk. There is no guarantee that you will get your money back when investing. Over time, investing will normally outperform cash savings but the investment value can also fall.

Saving Tips

  • Set savings goals, using different accounts. For example, use an instant access account to save for an emergency fund while using a fixed-rate account to save up for a deposit on a house.
  • Compare interest rates, as some accounts offer a high bonus rate to tempt you in, but the bonus evaporates after a certain period. 
  • Avoid savings products offering abnormally high interest rate, as they are often risky investment vehicles.
  • Be tax-wise, as you can earn interest tax-free using a cash ISA (up to £20,000 per year).

In the long term, avoid having more than £85,000 (or £170,000 for joint accounts) with a single UK bank or building society. This is the maximum amount protected by the Financial Services Compensation Scheme (FSCS). Be aware that some banking brands are part of the same authorised firm. If you have more than the limit within the same bank, then move the excess to another institution to ensure your money is protected by the FSCS. That’s a savings problem that you want to have!

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Visit at www.insurewithmax.com  or call the UK call centre 0333 323 0098 for more information.

Sources:

https://www.flagstoneim.com/news/uk-savings-ratio-at-historic-high/

https://www.economicshelp.org/blog/848/economics/savings-ratio-uk/

https://www.moneyadviceservice.org.uk/en/categories/how-to-save-money

Date: 15 February 2021 by max robinson