Saving money - it's not the easiest habit to master. Many of us balance work with an active social life which, combined with paying rent and the associated costs, means it can be difficult to put aside extra money each month.
However, there are now more ways to save than ever before - so we've taken a closer look at tenants' saving options and some practical ways to save.
Saving options for tenants
One of the most popular ways to save money is through an Individual Savings Account, known to most as an ISA. The predominant benefit of an ISA is that you don't have to pay tax on what you save. At the start of each tax year, you’re given a tax-free ISA allowance. Currently, over 16s get an allowance of £15,240 – which is the amount they can save before the Government start taxing it.
As with all bank accounts, ISAs come in different forms with different criteria depending on the type of saver you are. For example, some ISAs allow you to withdraw funds whenever you want, while others limit your withdrawals (but are therefore likely to offer you a better interest rate).
Alongside traditional cash ISAs, there are also stocks and shares ISAs and innovative finance ISAs – as well as certain ISAs which are more suitable for tenants:
- Help to Buy ISA
As the name suggests, Help to Buy ISAs are designed for prospective first-time buyers saving to get on the property ladder. The Government initiative allows you to save £1,200 in the first month and then £200 every month after that.
The benefit of this type of ISA is that, when you come to purchase a property, the state will top up your savings with a 25% bonus. For example, if you've saved £10,000, the Government will add an additional £2,500 to your account at the point of purchase. If you're serious about getting on the property ladder, then this is a good option for you.
- Lifetime ISA
Being introduced from April 6 2017, the Lifetime ISA is a little more flexible than its Help to Buy counterpart. As well as being suitable for first-time buyers, the Lifetime ISA - or LISA - can be used to save for retirement. You can use the funds in a LISA to contribute towards a property purchase at any time (providing it’s been open for a year or longer) or when you reach the age of 60, you'll be able to withdraw all the funds you've accumulated over the preceding years to fund your retirement.
LISAs are available for people aged 18-40 and a 25% bonus on anything you save, up to £4,000 each year, is paid by the Government. This means that someone who opens a Lifetime ISA on their 18th birthday could earn a £32,000 bonus by the time they’re 50 if they save the full amount each year.
Practical ways to save
Most of the best ways to save are well-documented but, just because something makes common sense, doesn't mean it's always put into common practice. Here are some reminders of tried and tested ways to actively save money:
For many people, the undisputed best way to save money is through budgeting, as the saying ‘fail to prepare, prepare to fail’ rings true. Budgeting can be as simple or complicated as you want to make it; the most important thing is that you stick to it if you want it to work.
One of the key things to budget for – and something which is likely to be one of your most expensive regular outgoings – is food. Planning your meals is an effective way of saving money on food. It can also be beneficial to be innovative and make interesting meals out of what you’ve already got, rather than buying more. If you’re thoughtful with your provisions of fresh and long life produce, you won’t find yourself throwing food away every week.
It can also pay to budget for, and save gradually towards, holidays, rather than paying for them in one big lump sum. If you’ve saved small bits here and there, then it won’t hit your bank balance so hard when you have to pay for flights, accommodation or spending money when going away.
One tip that you may have seen a lot of in recent times is to switch bank accounts. A number of high street banks offer incentives for switching current accounts. Among others, First Direct, Halifax and Co-op Bank all offer cash bonuses of £100 or over for switching to one of their accounts. Moving between banks is very straight-forward these days and should only take a week to go through so it's definitely worth considering.
Another tried and tested shopping around formula is using price comparison websites - whether it's for groceries, flights, car insurance or internet providers, these websites can help you to get the best deal possible.
Other useful methods of shopping around that could save you money include finding phone contract deals and fare splitting rail tickets. If you find a comparative phone contract that’s more competitive than what you're currently paying, take this to your provider and it's likely they'll be able to match the price or offer you some extras. Meanwhile, ‘fare splitting’ is when you split tickets by combining cheaper single tickets along your chosen route - savings can be significant if you book in advance, especially for peak fares. There are numerous sites dedicated to this practice and they are always worth checking out before booking train tickets.
Cutting out the extras
Sometimes it's not that easy to keep track of our spending and just exactly what we're paying for each and every month. In an age of contactless card payments and online transactions, it can be common for people to lose track and overspend. Making a list of all the things you buy on a monthly or weekly basis is an effective - not to mention therapeutic - way of taking control of your spending.
Seeing just how much you spend on takeaway coffees or shop-bought sandwiches each year may come as a bit of a shock to the system. It's also wise to check your bank statements regularly and see what direct debits are going through. Do you still need to pay £30 a month for the gym membership that you haven't used for half a year?
No matter your situation, saving money each month is never easy. But, with a concerted effort, some thought and some planning, you can start putting away more. Whether you’re looking to save for a house, a holiday or just for peace of mind, taking into account some of the tips above can help you on your way.