News

29/05/2012 16:50:04

Building up a savings pot

With the economy in its current state and further storm clouds on the horizon in the form of the mounting problems in Europe, it's never been more important for consumers to start building up a savings pot for their future, even if money is tight and barely seems to cover monthly expenses.

Despite stretched household budgets, people are continuing to save, particularly if they have a goal in mind, such as buying a home or taking a holiday.

Typically, households will look to save £5,384, with the latest data from Lloyds TSB's Money Manager suggesting that they are, on average, 11 per cent of the way towards this target after two months of saving. However, the goals you set will depend somewhat on what it is that you want to buy. Obviously, a house is going to require more money than a holiday, with consumers typically looking to build a pot of £10,000 to get on the property ladder.

Jatin Patel, director of current accounts for Lloyds TSB, recommends setting a savings goal, as it can help ensure you regularly put money away in pursuit of holidays, houses or cars. "We are seeing that customers who do this are reaping the rewards of regular saving and making significant progress towards their goal in a short space of time," he says.

But if you don't have a specific target in mind, it can be much more difficult to set yourself a savings goal, particularly if you are looking to put money away more generally for the future. While it might be easy to refrain from impulse purchases if you know they're coming out of your summer holiday spending money, you're likely going to find it more difficult remaining disciplined with nothing tangible on the horizon.

Setting a monthly standing order to save money

That's why it can be a good idea to set up a monthly standing order from your current account to savings account, so that you are contributing to your pot automatically, without having to consciously move money across.

As first direct's research shows, most people setting up a regular standing order or Direct Debit into a savings account will stick to their regime, with only six per cent of those with such an arrangement in place cancelling it within the first 12 months.

According to the data, a quarter of UK adults have put in place an automatic savings habit, typically putting aside £99 each month, with men and those in their 30s shown to be the most successful savers. Saving this amount each month will lead to a pot of over £1,200 after one year alone, with those able to put aside £300 a month building up savings of as much as £3,750, at market-leading savings rates.

Bruno Genovese, head of savings at first direct, says: "With numerous pressures on our household finances and a lot of payments to juggle and keep on top of, it can be difficult to remember to set aside the money to save, which is why a regular, automated savings habit can be the best habit to get into for those who are able.

"Once set up, they require minimal effort to manage and are often left to run and run, helping savers to build a substantial savings pot."