Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
The secret to saving that you need to know
Marc Crosby
20th Oct 2019
The secret to saving has been revealed – save with a goal in mind.
Last year, two thirds of those who saved with a goal in mind reached their target according to research from the robo-advice platform Nutmeg.
This makes sense when you think about it, after all it’s much easier to know the steps you need to take when you have a specific target in mind.
- Best way to save: have a goal in mind
- Best way to save: incentivise yourself
- Best way to save: automate it with a standing order
Best way to save: have a goal in mind
There’s something about us humans that means we work harder and better when we have a specific – and attainable – goal in front of us.
Ideally this goal should be
- simple
- attainable
- timed
So, rather than say vaguely to yourself that you’d like to save enough to put down a deposit on a house, work out:
- How much it’s going to cost you – let’s say £20,000 (if you’re living in the South East)
- How much you could reasonably save each year (particularly if you do some extra money-earners on the side) – let’s say £4,000.
- This means it will take you five years to save for this deposit (unless you manage to get extra bonuses from work or cash help from relatives along the way).
- Don’t think too much about this long-term goal. Set yourself shorter term goals instead:
- Set yourself a goal of saving an extra £350 a month that you put into a special savings account earmarked for your home deposit (or put in a Lifetime ISA so that you get extra money from the Government).
- If you do particularly well one year give yourself the extra incentive of having a savings month off in December (so that you can have a fun Christmas and buy presents for people).
That’s just one goal. You might have others like saving for a car or a holiday or paying for uni – work on those in the same way…short-term, achievable savings goals.
Best way to save: incentivise yourself
Equally having an extra incentive or ‘commitment device’ means that savers set a higher target for themselves. Those who used an extra incentive last year aimed to save £4,900 compared to those who did not have an incentive, who only aimed to save £2,500.
But what incentives can you give yourself? Well it can be as simple as
- Telling your friends or family what you aim to save. Vocalising your target and letting others know what you’re aiming for will make you psychologically more determined to meet that target.
- Writing down your goal plus the cost of it. Then each week you can add up how much you’ve saved so far and how much closer you are to your goal. It could be:
-
- A secondhand car – £4,500
- A trip to Florida – £1,500
- Christmas – £450
…or whatever are your personal goals. Think about what they are and start planning – it’s actually quite fun (no really…it can be!).
Best way to save: automate it with a standing order
Another way is to have a monthly direct debit straight into your saving account, that way you don’t have a choice but to save.
See how to do this – we call it ‘paying yourself first’ – in this fab article about sneaky ways to save!
The best way is to see if you can agree to get a friend or family member to match what you’ve been able to save – people who do this aim to save £6,000 a year (hardly a surprise!)
Psychologist Donna Dawson says: “The best way to reach a goal is to narrow your focus and to make that goal ‘specific’ – this enables you to work out the steps to achieve it. A general goal with no structure becomes fuzzy and forgettable, whereas setting up regular reminders for something specific can help keep you on track.”
Interestingly it’s young people who are the best goal-based savers, with over three quarters meeting their target, whereas only just over half of over 55s made theirs! If you’re over 50 and find it hard to save then visit our money-saving section for over 50’s for some help.
For some great saving tips read our 26 painless ways to save more money today.
Let us know your top saving tips in the comments section below.
Useful tip for saving.
Sounds a bit like dieting to me, but then that can be trying to reach a certain weight as a goal. Shouldn’t saving be taken as part of budgeting though? What about unexpected big bills like your boiler breaking, your car repairs or even loosing a source of income for a short while? I see saving as the flipside of borrowing. The differences being with borrowing you get the money instantly and pay it back in installments with charges (interest). For saving you pay yourself first in installments and receive a charge paid to you (interest) until you reach the… Read more »
Thanks for your comment Neil. You make some very good points.