What is it you’re looking to achieve? From wanting a security net to getting ready to head overseas, there are a range of reasons to save. Whatever you're wanting to do, having a specific goal in mind may help you get there quicker.
Saving for an emergency
There may be occasions where you’re faced with unexpected costs you need to cover, or as we’ve seen with coronavirus, a period where you’re not able earn as much money as you normally would. This is where an emergency fund can come in handy. Experts recommend having around three months’ worth of savings to cover your outgoings, but this will depend on your individual circumstances.
Having an emergency fund in place can give you the confidence to start focusing on other financial goals, as you know that you’ve got security should something happen.
Saving for a home deposit
If you’re wanting to own your own home, you’ll likely need to save a deposit between 5-20% of the value of the home you want. On average, first-time buyers put down a deposit of around 20%1, but some mortgage lenders may lend a 95% mortgage depending on your circumstances.
Keep in mind, the more you borrow the more you’ll have to repay and also pay in interest, so it can be helpful to save as much as possible.
Saving for a family
If you’re wanting to start a family, putting some money aside can be helpful. From prams and beds to everyday items like food and nappies, the average cost of raising a child until they’re 18 is over £75,000.2 And that doesn’t take into account the likes of childcare costs or any other extras.
Building up your savings may help you stock up on essentials before your baby is born, or provide extra support if one partner is on maternity/paternity leave.
Saving for a holiday
Family holidays cost an average of £2,417.3 But where you’re going, how many people are going and how long you plan on going away for, will determine how much you need to save.
If you’ve already decided where you want to go, try looking at the price of flights and the cost of hotels online to give you an idea of how much you’ll need to set aside. It’s also a good idea to look up the cost of local attractions and food, so you can make sure you take enough money away with you.
Explore more: Should you use a card or travel money outside the UK?
Saving for retirement
People in employment will be automatically enrolled in a workplace pension scheme, but that doesn’t mean you can’t save extra yourself. You can add to your pension pot alongside your employer and normally receive tax relief on up to 100% of your annual earnings or a yearly allowance of £40,000 – whichever is lower.4
Your lifestyle will influence how much you need to save for your retirement, so it’s worth sitting down and looking at all the essential expenses you'll likely have – including things like holidays.
From ISAs (individual savings accounts) to regular savers, there are a number of different savings accounts available. Finding the right savings account for your needs will be useful and you may be able to grow your savings faster with any interest you make.
This article provides general information and does not take into account the financial situation of the reader. For this reason, it must not be relied on as financial advice. All accounts are subject to terms and conditions.