The UK is in the midst of a tough economic period, brought on in large part by rising costs associated with both energy and trade. Financial literacy was already an important virtue to have, but today is especially important.
Savings are nothing short of essential as financial undertakings go, no matter your personal circumstances or outlook for the future. Savings are your future-proofing, the mechanism by which you brace yourself against unexpected costs – whether short-term shocks like a broken boiler or longer-term economic shifts such as the high rates of inflation we have been recently experiencing.
A considered approach to saving is also vital for, at the very least, preserving your ideal standards of living in later life. Even in an ideal economic environment, growth begets inflation; over time, the pound is, relatively speaking, devalued. As such, a pound after you retire may not stretch nearly as far as a pound today. Utilising long-term savings strategies, whether high-interest savings instruments or investments in global index funds, can help you generate additional money through compound interest and minimise the impact of inflation.
Saving is an extremely beneficial undertaking that all Brits should, to some extent, fold into their financial planning. But the reality is a little different from theory, and the actual saving habits of people in the UK are telling in this regard.
According to recent statistics, the median amount that an individual saves each month is £180 – with the average household saving amount at £480. How this measures up to how much you should be saving is difficult to ascertain objectively; everyone’s situations are different, and yours may be less conducive to considerable monthly savings than others.
In figuring out how much you should be saving, the question shouldn’t be how much everyone else is saving. Rather, you should be concerned about what is possible with your own finances. As such, your personal or household goals and your income should form fundamental parts of your eventual savings plan.
Deducting how much you spend on your home, essential groceries and utilities from your income will give you a baseline from which to work. This number is the absolute maximum you can save without changing your employment or living circumstances.
Much of this disposable income will be wrapped up in subscriptions and non-essential lifestyle options, and a smaller amount given to luxury and leisure spending. Knowing the proportion of these can help you figure out where best to cut costs. Subscriptions are an easy place to start. Finally, spreading your savings across more than one avenue can help you minimise risk, and maximise your gains.
Saving is an extremely important undertaking, but also one which can cause a lot of anxiety in households. Are you saving enough? And how much should you be saving?