While lockdowns may have curtailed our liberties in many ways, the last year has been a positive one for our savings. According to the FT, the Bank of England calculated that consumers accumulated £125 billion in savings between March and November 2020, with that figure still rising.
Households deposited an additional £18.5 billion in bank accounts in January, close to the record amounts saved in May and December 2020.
Increasing your savings can give you more financial security, help boost your future income, and provide you with resilience against unexpected events.
If you’ve already managed to save more during the pandemic – great! If not, or you’d like to save more, here are five tips for generating cash savings that can help to boost your wealth.
1. Consider a remortgage
Financial analysts Moneyfacts recently reported that one in three mortgage borrowers who have faced financial hardship due to the pandemic are planning to revert to their lender’s standard variable rate (SVR) when their mortgage term ends.
Concerns about taking a mortgage payment holiday, changes in income, or being furloughed are the main reasons why borrowers may be reluctant to switch their mortgage when their fixed- or tracker‑rate deal ends.
If you do nothing when your existing mortgage deal ends, then you will likely revert to your lender’s SVR. Moneyfacts research shows that the current average SVR in the UK is 4.41%, whereas the average two-year fixed-rate deal is available at 2.57%.
On a £300,000 interest-only mortgage, taking the average two-year fixed deal would save you around £450 per month when compared to sitting on the average SVR. That’s £450 you can redirect to your savings or pension.
2. Pay your future self first
A common way to save is to see what’s left in your bank account at the end of the month and put it aside for the future.
One way to increase the amount you save is to do the opposite, and to pay your future self first. Make your ISA, pension, and savings contributions immediately after you are paid every month, and then budget based on what’s left.
You could then try increasing the amount you put aside by small amounts, boosting your savings while still leaving yourself with enough to enjoy your life.
3. Switch your energy supplier
Forbes reports that the number of households switching their electricity supplier fell by 6.5% in 2020. Around 11 million UK households who have never switched energy supplier or who haven’t switched for two or three years could be sitting on expensive default tariffs.
If you haven’t reviewed your energy supplier recently, Ofgem say that switching to a cheaper tariff could save the average household more than £300 a year.
There are lots of online comparison services that can help you find a better deal – you’ll typically just need a couple of recent energy bills to hand so you can accurately input your energy usage.
The process itself is normally straightforward and could help you to reduce your bills, generating cash for you to save.
4. Reassess your spending
There’s a strong chance your spending habits have changed significantly in the last year. Maybe you’re spending less on eating out? Perhaps you’re no longer paying for a commute to the office?
Of course, some of your discretionary spending will resume when lockdowns ease. You may decide to take a holiday, book a theatre trip, or head out to the local pub for Sunday lunch.
However, now is a great time to see if there are any savings you can make. If you’re not going to be in the office every day, redirect a couple of days’ transport costs to your savings. If you’ve managed without a morning cappuccino, save that £15 every week. If you’ve enjoyed walking or running, or a Joe Wicks workout, can you cancel your gym membership?
Every spare few pounds you can save is money towards making yourself more financially secure.
5. Make the most of tax-efficient savings
Even if you can’t generate any more surplus cash to save every month, making the most of the savings you do have is key.
Using tax-efficient vehicles for your savings can give your wealth a significant boost. For example, making a pension contribution gives your wealth an immediate 20%, 40% or 45% boost simply based on the tax relief.
At present, if you’re a higher-rate taxpayer and you make a £100 pension contribution, it only costs you £60.
Compare investing that £100 in the average easy-access savings account (interest rate 0.17%) where you’d earn 17 pence interest a year.
We can help you to find the most tax-efficient ways to save, helping you to keep more of your money and boost your wealth.
Get in touch
If you’d like to review your savings or investments, or you want to explore how we can help you in this uncertain time, please get in touch. Email firstname.lastname@example.org or contact your adviser on 020 3828 8100.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.