When it comes to financial milestones, saving money is a big one. Without an emergency fund on the side and money to invest, getting ahead financially can be very difficult.
According to recent research by automatic savings app Chip, savers who put money aside on payday save 114% more per month, which comes to an average of £168.47. In fact, when Chip looked at the financial habits and patterns of 300,000 users, it found that paying yourself first can help savers put aside an additional £2,021.64 per year.
Focusing on your financial milestones
Auto-saving apps use AI technology to figure out your spending habits, then save money based on that. This allows you to save up for your own financial milestones and goals without even thinking about it.
That additional £2,021.64 you save this year could go towards your savings goals or meet one of your money goals.
According to Chip, the top money goals for 2021 are:
- Financial safety net
- House deposit
- Credit card
- Car deposit
- Car insurance
- Driving lessons
Chip’s money expert Tom Martin explains: “If you need any motivation to get your finances in order this year, think of your future self and where you will be this time next year if you manage to hit your money goals. As they say, the best time to get your money in order is yesterday and the second-best time is today.”
Why you should pay yourself first
Paying yourself first is one of the top things you can do to supercharge your finances this year, according to Tom Martin.
“Simply move an amount of your choosing into savings as soon as you get paid and before you get caught up in the excitement of your pay hitting your account – out of sight, out of mind,” Martin says. “Make sure you factor in your bills, direct debits and any other regular outgoings when you work out the amount, but remember you can always adjust it to what is feasible and sustainable. Think of it as paying your future self.”
While you could do this manually, using a savings app makes it easy to automate the process. This way, you’ll be less tempted to ‘cheat’ and more likely to keep your financial milestones at the forefront of your goals.
For example, Chip’s Payday Put Away feature will automatically set aside a certain amount once your salary hits your account, removing the spending temptation.
Reasons to save now
“As usual, each January comes with a plethora of savings challenges and tips, which, while fun, can often be unsustainable,” says Martin.
In addition to setting money aside for your planned financial milestones, any extra money you save with these challenges can also serve other purposes, according to Martin.
If your unsecured debt is eating into your earnings and savings, it’s time to take stock of how much you owe and then come up with a plan of action. “However, if you find yourself seriously struggling, I’d recommend getting in touch with StepChange, the debt advice charity, who can offer free financial advice based on your situation,” Martin adds.
Put your money to work
Don’t just save – make sure every penny you put aside is earning a return. “Good returns are hard to come by these days, but it’s not all doom and gloom. The new Chip+1 account pays the market’s highest return of 1.25% (variable) – 125 times better than the big banks – whereas investments can offer another avenue to earn interest on your savings,” according to Martin.
Some offers on MyWalletHero are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.