Studies show roughly 80 percent of New Year’s resolutions fail with many of them being forgotten by February. However, Atom Bank’s head of savings Clare Framrose shared her expert advice on how a little planning and preparation can help families achieve a financially secure and healthy 2022.
The COVID pandemic has showcased how vital financial security and emergency savings are in the worst-case scenario.
With the future of the pandemic, workforce and the economy still fluctuating, many simply want to ensure that their family is provided for no matter what the future may hold.
Atom Bank found that saving for a secure future came second in Britons savings motivations, narrowly missing out on saving for a holiday.
Ms Framrose shared that savings should be part of one’s ordinary routine, no matter what they are actually saving for.
She recommended that savers set up regular transfers to their savings accounts for the day after they get paid.
Putting away one’s monthly savings as soon as they receive a paycheque is a highly recommended savings strategy, commonly known as “paying oneself first”.
Ms Framrose recommended long-term fixed savings accounts, where withdrawals are either completely out of the question or come at a high cost.
This makes one less likely to spend their savings on impulse or unnecessary purchases, making them think twice about whether the items are worth the money.
Additionally, fixed savings accounts generally have higher interest rates than easy access accounts, meaning that the money can also grow faster over time.
However, Ms Framrose also cautioned savers to have an instant saver or easy access account that they regularly put into as well
She explained: “This way you’ll also have easy access to some funds, in case of unexpected emergencies.”
Many financial experts also advise setting a savings goal, either as the amount they want to build towards or the amount they want to save every month.
Having both will ensure one stays on track with their savings plans, providing financial stability and security for their household without having to do much if the payments into their savings accounts are automatic.
Ms Framrose advised: “I’d recommend doing a little research into your own financial situation to help you work out a rough figure to aim for.
“For example, three months’ worth of your usual living expenses could be a nice sum for an emergency fund. Once you have a figure in mind, it should be easier to steadily aim for it.”
Atom Bank also shared that for those looking to start or save for their family should expect an average cost of £11,498 for the first year of a child’s life.
Roughly calculating, this means raising a child from birth to the age of 18 amounts to £150,753.
Ms Framrose recommended that creating a savings buffer before starting a family can ease the financial pressure that comes with raising a child.
She recommended a unique strategy for this: “Start by estimating the ongoing costs you expect to pay after having a child and then act as if the baby has already arrived, this way you can start to factor that figure into your cash flow beforehand.”
Shifting the money one will spend on their new child into a fixed saver account will not only replicate the financial situation after the child arrives but also give one a head start on their savings buffer.