January Beaulieu magazine column
Happy New Year!
Welcome to my first column of 2021 and I’m sure we all hope this year is much better than last!
January will inevitably see many of us committing to New Year’s resolutions. The top five resolutions are almost always dominated by plans to lose weight, improve fitness, get a new job, save more and learn a new skill or hobby. Typically, between 30 – 40% of people resolve to save more during the year.
What’s disappointing to know is that the failure rate for our resolutions is around 80% with most losing their resolve by mid-February. Given that four in ten Brits also have less than £100 in savings, according to the Money Advice Service, this month’s column will focus on a number of tips and ideas on how to improve your savings in 2021 and give you the best chance of achieving your savings resolutions.
Here’s my top tips and savings challenges to help you save more this year:
- The 1p savings challenge
This is a really popular, cheap and simple way to save money through the year. It starts by saving 1p on 1st January, 2p on 2nd January, 3p on the third and so forth. Each day you save a penny more than the previous day. This will mean putting away £3.65 on 31st December giving you £667.95 at the end of the year.
You can increase this amount by earning interest on it. Mobile app based bank, Atom, offers an easy access savings account with a £1 minimum balance and pays a very competitive 0.50%. Saffron Building Society offers an online enviro saver which pays an excellent 0.45% and it can be opened with £10. The Society will also pay 0.10% of your balance to The Conservation Volunteers which is a great way to improve your return and help an excellent cause.
This is a really popular challenge as it costs very little in January, when people tend to have the least money spare to put away. It also means doing something every day so helps to reinforce the savings habit.
- The reverse 1p savings challenge
For those wanting to start the New Year by putting a way more, simply reverse the 1p savings challenge and put away £3.65 on 1st January and reduce the amount you save by 1p per day so that on 31st December you will add just 1p to your savings. Reversing it also means those saving in an interest bearing account will earn more throughout the year because your balance will be higher for longer.
- The 52 week challenge
This is a weekly savings commitment which means either putting away a fixed amount each week or starting with a small amount and increasing this each week.
A fixed amount challenge could be £1, £5, £10 or any amount that works for you. Those saving £1 a week will have £52 at the end of the year with £5 savers having £260 and £10 providing a pot of £520 at the end of the year.
The beauty of this challenge is that it is easy to automate – savers can simply set up a regular payment to move the sum they decide on into their savings account each week.
Those wanting to start small and increase their savings could go for £1 in the first week and increase this by £1 every week during the year, putting away £52 for the final week of 2021. This will yield £1,378 at the end of the year!
Like the 1p savings challenge, this can also be reversed and started by putting away £52 in the first week of January and reducing throughout the year.
- The £5 challenge
This is by far the hardest savings challenge and involves saving £5 on week 1 and then increasing by £5 each week, so by the last week of 2021 you are saving £260. This creates a savings pot of almost £7,000 though! Even doing this for half the year will create a pot of £1755 by July.
An alternative version is to save £5 each week, which gives a pot of £260 at the end of the year.
- Regular savings accounts
My favourite savings account is a regular saver. I’m a huge fan for two reasons. Firstly, they pay the best rates on the market of any account. For example, Cambridge Building Society pay 3% to existing members, West Brom pays 2% with its branch based regular saver and Coventry Building Society pays 1.30% on an account which is open to anyone online, by post, phone or in branch. All these best the best 5 Year Fixed term bond (1.25% from Shawbrook).
Secondly, saving successfully is a habit and these accounts are a great way to start and stick to saving as they set up a regular commitment.
Typically, regular savings accounts allow you to save between £10 and £500 per month for the year with the Coventry account starting at £1. My recommendation is to sign up make the payment on a date that you get paid. That way, the money comes out of your current account when you have your highest balance and you are less likely to notice it has gone and it stops it being spent.
If you have any of your own savings challenges, we’d love to hear them. Drop us a note with them or share with us on social media. Whatever your New Year resolutions, I wish you all a Happy and Prosperous New Year.