According to NatWest, which looked at the data of 750,000 anonymised customers, around half are not saving any money each month. Household finances are under pressure – earlier this year the Resolution Foundation thinktank described it as “an unprecedented income squeeze over the past decade”. Martin Lewis, founder of Money Saving Expert, agrees: “There are people in this country who have less income than their minimum outgoings, and that is a real crisis,” he says. However, part of it may also be an attitude problem: the NatWest survey found that those earning over £90,000 were just as likely not to put anything away. So, if you have money coming in and a potential to free up cashpotential to free up cash, how can you get into the savings habit? Lewis has some tips.

Look at your debt first

If you have expensive debts, it’s better to clear them than to save. If you are debt-free except for your mortgage, the interest rate on that will probably be higher than savings rates, so you should consider overpaying your mortgage, although I would like to see a minimum of three months’ worth of bills put aside.

Analyse what you spend

Sit down with three months’ worth of bank and credit-card statements, factor in Christmas and other expenses. Make sure you are not overpaying your gas and electricity bills, you’re getting the best deals on things like your digital TV, and work out your necessary expenditure. Look at your discretionary spending – that £3 coffee every working day is £750 a year. Set up different accounts, and as soon as you get paid, put money away – but manage your cash so you don’t go overdrawn, because that defeats the point. You can start to learn what spare money you really have, and start to discipline yourself. We are very unrestrained when we don’t have a budget.

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Look for the best-paying savings account

The minimum anybody should be earning on savings right now is 1.45%, which is the rate of the top easy-access account. There are ways to earn more, such as locking money away. If you are young and saving for a property, open a Lifetime ISA, which will give you a 25% boost. For those people on a low income, the government has a Help to Save scheme – I was worried it would encourage people to keep money in savings when they should be clearing their debts, but it’s a clever scheme.

Get into the right mindset

If you are able to free up some cash, saving is about a mindset change. Some people like a challenge – put a penny aside on the first day, 2p on the second day, 3p on the third. Anything that gets you into the habit is worthwhile. For younger people, if you’re lucky enough to get a pay rise, put a quarter of it into savings straight away, because once we get used to having more money, we find it very difficult to have less. It’s a difficult time to save at the moment because interest rates are so low, but anything you can do break your habitual pattern, and start to put money aside – if your finances have room – will be helpful.



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