I saved £150 before breakfast

blue piggybank

Why should you care? Because it's one of my five strategies to increase my savings. Not that I'm saving for a deposit for my first home, but the principles are sound whatever you're saving for.

According to the Council of Mortgage Lenders, 80 per cent of Brits would rather own a house than rent. A large number of first-time buyers rely on the Bank of Mum & Dad, whilst others lean on the myriad of Government-led incentive schemes.

Regardless of how you do it, a deposit of some sort will be required. Before Covid-19 the supply of 90 per cent mortgages was increasing, but the average first-time buyer puts down a 20 per cent deposit. Given the Land Registry states the average UK house price as of January 2020 was £231,185, that's an eye-watering £46,237.

Below are my top three ideas for boosting that savings fund. And if you're not saving for a deposit, so what! Use the advice below to save for your gap year, wedding or first car - they'll work for all those goals too.

1. Work out how much to save each month

Figure out the size of deposit you’ll need by looking at the average price in the area you're looking. Use tools on ZooplaRightMove & MousePrice for this. Try this handy calculator from Which? to give you a headstart:

Easy singles beat boundaries

Regular saving is more effective than relying on irregular one-off sums. I use the cricket analogy above as it took me a long time to realise this. I was forever relying on my annual bonus or my next big commission. But over recent years, I've squirrelled away 5-10 per cent of everything I've earned. And my savings have never looked so healthy - it also allows me to leverage compounding too.

Suppose you want to buy in three years and will need the £20,000, you’ll need to save around £550 a month. If that feels too hard, aim for £300 - it just pushes your plan to buy in just over five years. It's better to save what you can than trying to save too much and giving in.

2. Set up a regular savings payment

Be realistic about how much you can afford to set aside each month. If ten per cent seems too much, aim for five but always save - it becomes a habit. Once you've decided how much this is, set up a standing payment to your savings account.

Just like bills, which we know have to be paid, you'll soon get used to not having the extra cash in your bank account each month. This is an old trick, but few people know or use it.

If you think you can't afford to save some of what you make, you've just become a victim of what's called Induced Demand – put another way, if you earn a £1,000 you'll spend a £1,000 (or more likely £1,001).

3. Make lifestyle changes

Cut out unnecessary payments means your savings will soon add up. Now I'm not from the school of thought that says give up your daily coffee if it makes you happy. But if you're spending more than £3 a coffee, maybe think about dropping the syrups and cream. Your bathroom scales will thank you as well.

Instead, look at the bigger ticket items. Personally, during the current COVID-Lockdown, I've quit paying a gym membership. Instead, I'm running and exercising in the garden/living room and frankly, I'm no less fit.

Use a price comparison website and make sure you're are on the lowest phone and utility tariffs. When the big annual costs like car and contents/home insurance come up, jump on the comparison engines too.

(This is where I saved £150 before breakfast - my annual car insurance is up for renewal at the end of this month. After a bit of research I found a much better deal, thanks very much).

Do something with these savings!

It's all well and good making savings on your outgoings, but make sure those extra pounds find their way into your war chest! Find the best possible vehicle to protect and grow the savings - these are your little seeds after all.

I would consider either a cash ISA (your personal ISA allowance is £20,000 for 2020/21) or NS&I Premium Bonds. Whilst the latter doesn't pay interest, the opportunity to win (tax-free) each month tempts me to keep some of my savings there.

On the basis, I would have spent that £150 in car insurance premiums anyway, I immediately took £150 and put it into my savings account. I do the same if I go out to dinner expecting to pay. If I'm lucky enough that someone else picks up the tab, I'll take that money (I would have spent anyway) and that goes to my savings too.

You'll get a pleasant surprise at how quickly that pot of savings grows - that'll give you some positive reinforcement to continue finding new ways to save more.

Has the penny dropped?

I'm not going to say "Saving can be fun!" - I don't believe you're naive enough to buy that. But put in some solid rules and habits (even gameifying the savings process) & you'll soon generate momentum. That in itself is invaluable and will keep your eyes on your savings goal.

Good luck and let me know any clever ways you manage to save for those big-ticket items like a home deposit?

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