Expert Advice on Savings for Financial Security

Everybody is in a unique situation regarding their financial status, which is why the tailored advice of an expert is such an important consideration when you’re looking to save or invest. Starting to save money is a great financial habit that can help you achieve your financial goals and build a stable financial future. Here are ten top tips on the best ways to start saving money:

1. Create a Budget: Creating a budget is a great first step towards saving. It will help you understand your income, expenses and spending habits, and allows you to identify areas where you can cut back and save money.
2. Set Savings Goals: Setting specific savings goals can help you stay motivated and focused. Whether it's an emergency fund, a deposit for a house, or a holiday fund, having clear goals can help you prioritise your saving efforts.
3. Automate Savings: Set up automatic transfers from your current account to a separate savings account each month. This way, you can save money before you have a chance to spend it. Try and resist the urge to ‘borrow’ it back.
4. Track Your Spending: Keeping track of your spending can help you become more aware of your spending habits and adjust as needed. You could use budgeting apps or spreadsheets to track your outgoings and find areas where you can save.
5. Cut Unnecessary Expenses: Look at all your expenses and find areas where you can cut back. This could include dining out less, cancelling subscriptions you don't use, or finding more affordable alternatives for your regular expenses. Set realistic goals and finds ways of rewarding yourself for achieving them – but don’t spend more on the reward than you saved…
6. Pay Yourself First: Treat saving money like a bill that needs to be paid. Set aside a portion of your income for savings before you start spending on other things. This way, you prioritise saving rather than saving what's left after spending.
7. Manage Your Debt: Minimise credit card usage and avoid taking on unnecessary debt, such as high-interest loans or impulse purchases on credit. High interest rates on debt can eat into your savings, so it's best to avoid them whenever possible. It may be helpful to talk to a financial adviser about how to re-organise your debts if they are complex.
8. Look to Increase Your Income: Depending on your lifestyle and circumstances, maybe consider taking up a side gig or some freelancing to increase your income. The extra money you earn can be put towards your savings goals.
9. Be Mindful of Your Spending: Before making a purchase, get into the habit of asking yourself if it's a need or a want. Practice mindful spending by only buying things that are essential or sit parallel with your savings aims.
10. Review and Adjust Regularly: Review your budget and savings progress regularly and adjust as needed. Life circumstances and financial goals may change over time, so it's important to revisit and revise your savings plan from time to time. Whilst it is often wise to choose pain in the short term for gain in the long term, it is important to get the balance right and not force yourself into short-term suffering.

Saving money is a habit that takes time and discipline to establish. Allow yourself time to action your plan and celebrate small milestones along the way. With consistency and determination, you can build a healthy savings habit and achieve your financial goals and may then wish to investigate investments that will possibly grow your savings even more. KGJ are here to help you when you do.

As a guide, it has been recommended to save at least 20% of your income each month, and this is sometimes part of a savings approach called the ‘50 30 20 rule’. This entails using 50% of each pay packet for essentials, 30% for living your life (the ‘disposable’ part of your income) and 20% on savings, repayments and pension contributions. It would be lovely if everybody was in the situation to follow this rule, but of course, the appropriate percentage will vary depending on your financial circumstances. Here are some more factors to consider:

• Financial Goals: Your savings approach will likely depend on your short-term and long-term financial goals. For example, if you have specific goals such as buying a house, starting a business or saving for retirement, you may need to save a higher percentage of your income each month to meet those goals.
• Expenses: Your monthly expenses, including essential costs like your rent, transportation costs and groceries, as well as ‘disposable’ spending like entertainment and dining out, will impact the amount you save. If your expenses are high, you may need to save a higher percentage of your income to ensure you're able to meet your savings goals.
• Debt Payments: If you have debts such as student loans, credit card debts or a mortgage, you may need to allocate a portion of your income towards paying off those debts. This will impact the percentage of your income that you can save each month.
• Emergency Fund: Your financial peace of mind would likely benefit from an emergency fund to cover unexpected expenses such as car repairs or losing your job. Building an emergency fund should be a priority. Once you have built up an emergency fund, you can allocate a higher percentage of your income towards other savings goals.
• Retirement Savings: Saving for retirement is crucial. Workplace pensions often take your contribution out of your wage (after you have opted in) and sometimes your employer will match or even exceed your monthly contribution.
• Other Financial Priorities: You may have other financial aims such as saving for education, a deposit on a home or another major purchase like a new car. Consider these when determining the percentage of your income to save each month.

It’s a good idea to create a budget and track your expenses to ensure you're saving what you need to save each month to meet your financial goals. Consulting with an expert financial advisor will also help determine the right savings percentage based on your circumstances. KGJ is on hand to help you with bespoke financial advice.

When it comes to saving money, it's important to be mindful of potential mistakes that can hinder your progress. Here are ten common mistakes to avoid when you’re trying to save money:

1. Not Having a Budget: Budgeting is vital for managing your finances. Failing to create a budget makes it difficult to track your expenses. It's important to create a realistic budget that includes all your monthly expenses, debt payments and savings goals.
2. Not Paying Yourself First: Saving money should be a priority, and it's important to pay yourself first by setting aside a portion of your income. Avoid saving whatever is left over after your monthly spending, as this can result in low to no savings.
3. Neglecting Your Emergency Fund: Having an emergency fund is crucial to cover unexpected expenses like car repairs, losing your job or other sudden expenses. Failing here can leave you vulnerable to setbacks and may result in taking on debt or dipping into your savings.
4. Ignoring High-Interest Debt: High-interest debt, such as credit card debt or payday loans, can quickly accumulate and eat into your savings. Ignoring or only making minimum payments on high-interest debt can result in paying more in interest over time.
5. Not Shopping Around: Comparison shopping can help you save money on everyday expenses such as groceries, utilities, insurance and other goods and services. Failing to compare prices and options can result in overspending and missing out on potential savings.
6. Impulsive Spending: Impulsive spending, such as unnecessary purchases or excessive spending on non-essential items, can quickly eat into your savings. Avoid impulsive spending with good self-control and always evaluate purchases based on their necessity. Don’t forget that spending money on a good offer is still spending money, and that an investment is only an investment if it is going to make money!
7. Not Investing: Simply saving money in a regular savings account may not be enough to grow your savings over the long term. Avoid the mistake of not investing in assets such as stocks, bonds or property if possible, which have the potential to generate higher returns.
8. Overlooking Recurring Expenses: Subscriptions and recurring expenses such as monthly memberships, subscription services or unused gym memberships, can add up over time. Regularly review and evaluate all your subscriptions and recurring payments.
9. Failing to Track Expenses: Not keeping track of your expenses can easily lead to overspending. Use budgeting apps or spreadsheets to monitor your spending and identify areas where you can reduce expenses and increase savings.
10. Not Seeking Professional Advice: Avoid the mistake of trying to navigate complex financial matters without proper guidance, as it can result in costly errors and hinder you. If you're unsure about how to manage your finances or need help with financial planning, get in touch with us here at KGJ and we can begin the process of helping you get the very best out of your money.

Being mindful of these common mistakes and taking steps to avoid them will help you build your savings and progress towards your financial goals. Building savings requires discipline, consistency, and a long-term perspective, so stay focused and committed to your savings plan, safe in the knowledge that you always have KJG at your side when you need us.

If you’re looking to build up your savings in a bank account, there are several types of savings accounts that you can open with banks and building societies. Some common types of savings accounts include:

• Instant Access Savings Account: This type of savings account allows you to deposit and withdraw your money at any time without notice. It offers flexibility and easy access to your savings but often comes with lower interest rates than other savings accounts.
• Regular Savings Account: A regular savings account requires you to deposit a fixed amount of money each month for a set period. These accounts often offer higher interest rates compared to instant access savings accounts but have restrictions on withdrawals.
• Fixed-Term Savings Account: With a fixed-term savings account, you deposit a lump sum for a fixed period, usually ranging from one to five years. The interest rate is fixed for the duration of the term, and there can be penalties for early withdrawals.
• Cash ISA (Individual Savings Account): A cash ISA is a tax-efficient savings account that allows you to save a certain amount of money each tax year without paying tax on the interest earned. Like the above savings account, there are different types of cash ISAs, such as instant access cash ISAs, regular savings cash ISAs and fixed-term cash ISAs.

Always carefully consider your savings goals, financial needs and risk tolerance before choosing a savings account. Compare different options offered by various financial institutions to find the best savings account for your specific requirements, and don’t hesitate to take professional advice from a financial advisor - such as those at KGJ.

Savings accounts in the United Kingdom are considered safe up to a point, due to regulatory protections provided by the Financial Services Compensation Scheme (FSCS). As of April 2023, the FSCS protects deposits (amounts) up to £85,000 per person, per authorised financial institution. This means that if the financial institution holding your savings account fails and is unable to repay your deposits, you may be eligible to receive compensation up to the £85,000 limit.

To ensure the safety of your money in a savings account, it's recommended to choose an authorised financial institution that is regulated by the Financial Conduct Authority (FCA) and covered by the Financial Services Compensation Scheme (FSCS) and to keep your deposits within the FSCS protection limit. It's also advisable to seek advice from a qualified financial professional, such as those here at KGJ, before making any major financial decisions.

It is generally a better idea to save money in a savings account rather than as cash, and there are several good reasons for this:

• Interest: Savings accounts typically offer interest on the deposited amount, allowing your money to grow over time. In contrast, cash does not generate any interest, meaning its value remains stagnant.
• Security: Cash is vulnerable to theft, loss and even damage. Keeping large amounts of cash at home can be risky, whereas savings accounts are protected under the Financial Services Compensation Scheme (FSCS). See the above question, ‘Is my money safe in a savings account?’, for more information.
• Inflation: Inflation diminishes the purchasing power of money over time. Saving money in a savings account allows it to potentially keep up with or outpace inflation, helping to preserve its value.
• Convenience: Savings accounts offer the convenience of online banking, easy access to funds through cashpoint withdrawals or bank transfers, and the ability to set up automated savings plans, making it easier to manage and track your savings.

As with anything relating to your financial wellbeing, it is vital to consult with a financial advisor to determine the best approach to your savings, based on your individual financial goals and circumstances. You can contact KGJ today to begin the process of making your savings work for you.