And while you can’t up your salary overnight or magic away all those niggly weekly costs, there are still money-saving tricks you can use to grow your savings pot.
Five top tips for growing your savings
The ISA season is a great time of year to do a spring clean of your finances and explore new ways to give your savings a boost.
To find out more, we asked a team of psychologists, economists and finance experts to tell us the best ‘nudges’ and psychological hacks that can help everyone save more.
Pay yourself first
Do you ever get to the end of the month, and wonder where your last pay cheque went? With so little money left in our accounts in the run up to payday, trying to save £50-£100 can feel like an impossible task. That’s why financial advisers like Chad Nehring advocate the ‘pay yourself first’ rule.
Instead of saving what’s left, the idea is to work out how much you could theoretically afford to save each month, and then transfer it to your savings as soon as you get paid. You’ll have less money to spend on nice but not essential purchases and reduce your end-of-the-month money stresses.
Keeping an eagle eye on your purchases may seem an obvious way of cutting back, but despite its simplicity it’s proven to work. Whether it’s via automated text alerts from your bank or giving yourself a cash allowance for the week, studies show that self-monitoring boosts our chances of reaching our goals.
Keeping an eye on your spending doesn’t have to be time-consuming either. Apps like Wally and Money Dashboard do the hard work for you. Synch the app to your current account and you’ll see how much you’re spending on everything from trips down the pub, to shopping, and dining out. If you’re used to burying your head in the sand about your finances, self-monitoring might be the simple trick you need to reform your money habits.
Change your perspective
If you’re struggling with inertia over giving up small but unnecessary purchases, framing savings in a different way can work wonders. For example, a daily £3 coffee can seem like an affordable expense but when you reframe it as a £20 a week or £80 a month habit, the incentive to ditch your morning cuppa becomes much stronger. It doesn’t matter what your small indulgences are, just change your reference point and watch how those ‘oh why not’ purchases start to add up when you look at the bigger picture.
Slow-down the decision-making process
We’ve all had the urge to splurge at some point or another, whether it’s on eye-wateringly high gig tickets, or a swanky new laptop. But if all those in-the-moment purchases are taking a toll on your wallet, experts recommend delaying the decision-making process as much as possible.
One easy method is the 30-day rule. The idea is to take a piece of paper and write down the name of that item you can’t wait to buy. Put it up somewhere you’ll easily see - like your fridge or desk - and commit to thinking about that purchase for 30 days. If at the end of the month, the overwhelming desire is still there, buy it. But, there’s a high chance that stylish pair of shoes or must-have gadget won’t look so appealing after a bit of reflection. Why does this trick work? According to behavioural economist Dr Ashwini Natraj it ‘cools down’ our thinking and frames the decision as ‘delaying a purchase rather than doing without the product’.
Make a promise to yourself
We all hate breaking promises, especially when it’s one we’ve made to ourselves. That’s why Dr Charlotte Duke, a partner at London Economics, suggests using commitment devices to help you stick to your savings goals. “Commitment devices can help us overcome our present bias,” says Dr Duke. This is when we “pay more attention to immediate outcomes and give less weight to outcomes further in the future,” like saving up for a deposit on a house. By telling a friend or verbally writing down on paper that we will commit to an action, we increase the chances of us making it happen.
Agreeing in advance to save a certain percentage of our future salary increases is one way you can put this trick into practice. What’s more, banking your pay rises via an automated direct debit or transfer means you won’t miss it, and you’ll be well on your way to building up the savings you need for your future years.
Looking for ways to make your money work harder? A stocks and shares ISA can help you save more hassle-free.
The opinions expressed in this article are those of the individual experts and may not be representative of Legal & General. We are committed to bringing you a wide range of views on the best ways to save and spend your money.
Please note the information, data and any references in this article were accurate at the time of writing. Please check the date of the content if you’re looking for up to date investment commentary or tax-year related information.