ISAs, savings, and current accounts are just a few of the places you can keep any

spare money you have at the end of the month. If you are already doing so, that is

great as it means that you’ve already started saving.

A key consideration to ensure you are maximising the growth of your saved money is

to have a balanced savings plan. Having one will enable you to enjoy life in the

present while preparing for life in the future.

Why Should You Save?

At times when money is tight, this can seem like an excellent question. However,

money is a crucial factor in how you live your life and how you will live in your

retirement. Putting a little bit of money away will help when it comes to you covering

significant events, small luxuries, or unexpected emergencies. Ultimately, savings

will provide you with a greater degree of financial freedom.

Recommended Way To Save Money

Saving can be challenging, especially since spending money is more fun than putting

it aside. However, if you follow a few basic recommendations, it will make your

savings endeavours easier and turn it into a habit.

  1. Set Realistic Goals. Everyone has varying lifestyles, incomes, and spending

habits. When you are setting a savings goal, you should base the amount you set on

your situation rather than some arbitrary figure. Setting an unrealistic goal means

that you could be setting yourself up to fail, which could cause you to give up.

  1. Save Little and Often. Rather than setting a large, potentially unachievable

savings goal, decide to save a small amount but on a regular basis. Saving little and

often will take the pressure off your saving endeavours and make it more likely that

you’ll succeed.

  1. Become a Little Bit Tighter. There are few limitations on the opportunities to be

parted with your money. Bills, entertaining, food, travel; the list goes on. One of the

most significant benefits of the Internet for consumers is the ease with which it allows

you to compare prices. Start doing so for everything you are spending, and you’ll find

that you have more cash available to save.

  1. Create Different Money Pots. Having different money pots for the various things

you spend your money on will help you manage your finances and savings better.

For instance, you could have one pot for your daily expenses. Another pot could be

for storing some cash for an emergency fund. Or, one might be where you put your

monthly savings. There’ll be a bit more on money pots later on.

  1. Adopt the Payday Principle For Your Savings. This principle means that you

put some money into your savings pot as soon as your wages go into your bank

account. Doing so will mean that you won’t have an opportunity to spend the money

before saving it. Doing this for all your pots will help you understand how much

money you have left for the remainder of the month.

More on Money Pots

We briefly mentioned the benefits of having money pots earlier. Here are a few

different money pots to consider setting up:

Everyday Expenses Pot

This money pot should contain sufficient funds to cover your daily living expenses

such as food, bills, commuting costs, etc. You will need immediate access to this

money, so it should be kept in a current account. If you can find a current account

that offers some interest, any money you have remaining at the end of the month

has a chance to grow.

You might want to consider sub-dividing this money pot into several smaller pots.

Subdividing in this way is an excellent aid for staying within your budget. Where you

can, set up automated payments or direct debits for bills and other regular payments,

as these typically qualify for discounts.

Short-Term Savings Pot

In this pot, you can keep money that you’re saving for more significant financial

outlays such as large electrical appliances, holidays, or special events. A savings

account is an excellent choice of where to keep this money. As you may not need

access to the funds immediately, you should consider any restrictions on taking your

money out.

Emergency Funds Pot

As the name suggests, you will not know when you’ll need this money. However,

when you need it, you’ll need it immediately, so the best place for it is a savings

account that grants immediate access. Doing so will mean that you’ll get some

interest accruing on your money if you don’t use it.

The size of your emergency fund will depend on your lifestyle. However, in general, it

should be sufficient to cover your bills and living expenses for three to six months.

Don’t let this figure disturb you, as you should aim to build it up over time.

Retirement or Pension Pot

Your pension pot is a crucial part of your balanced savings plan. It is likely that

You’ve already made a start to saving for your retirement. Recent changes to auto-

enrolment into workplace pensions mean that you are building up your pension as

you work.

If you are employed, more than 22-years-old, and earn over £10,000 per year, your

employer is obliged to enroll you into a workplace pension. Having a workplace

pension means that 5% of your gross salary goes into your pension pot. However,

this is tax-free, so one-fifth of this amount is money that would have normally gone to

the government. Your employer also contributes an additional 3% of your gross


salary amount to your pension pot. Both you and your employer can contribute more

than these minimum figures if you wish.

It is now more crucial than ever to have a personal pension because of the decline of

final-salary pension schemes. These schemes guaranteed to pay you a set amount

in your retirement, which made them incredibly valuable. However, their value also

made them costly for companies to maintain. As a result, they are now rare.

There are various types of private pensions to which you can contribute. However,

some will perform differently to others, and the charges can vary significantly

between pensions. Whichever pension you take out, you should conduct regular

checks to ensure it performs as planned and that the charges are not rising


The State Pension

Depending on how many years’ worth of National Insurance contributions you’ve

made over your working life, you will be entitled to a certain level of State Pension.

Currently, the full State Pension is £179.58 per week, which equates to an annual

income of just over £9,000.

You should carefully consider if this will be sufficient to sustain the lifestyle you want

in your retirement. If it is not, you should consider setting up some other income

sources for when you retire.

When thinking about your pension, speak to a regulated financial adviser such as Portafina or, view the information at The Money Advice Service.