Households are feeling the pinch this year, with another year of hikes to essential costs from staple foods to the energy we use to heat our home. In difficult times, financial literacy is a vital skill to keep things ticking over – and saving one of the most impactful actions you can perform as part of that literacy. But what are some good habits to form in order to maximise the effectiveness of any savings strategies?
Pay in a Timely Manner
Late payments are often the root cause of key financial concerns, specifically in households where multiple debts are ballooning through hiked interest rates. Paying bills and debts alike in a timely manner reduces the likelihood of interest rate ‘penalties’, while improving your credit score for the future.
This can also be expanded out to a more general point, in relation to new phenomena surrounding consumer spending and e-commerce. Private enterprises like PayPal and Klarna offer 0% finance solutions for products of all kinds, allowing consumers to split payments over a period of weeks or months.
This is dangerous, as it can make budgeting harder and impulse spending easier – the latter of which can lead to painful backlogs. Rather than being tempted to ‘pay later’, even where no interest is added, try instead to restrict your purchasing to products you can afford in full and immediately.
Separate Savings from Spends
While saving can be done without the need for special accounts or products, issues can emerge where poor discipline impacts your savings – often without you knowing. Being able to properly partition your savings gives you the freedom to spend the money you are ‘allowed’ to spend without eating into your saved money.
Even a simple savings account separate from your current account is enough to guarantee that safety. It makes bigger purchases harder and more deliberate in nature, as the money that might be available for it needs to be consciously moved from your savings. It also gives you more control over what your savings can do for you, particularly if you fold in other savings possibilities like ISAs.
Shop Shrewdly
Lastly, this may seem a basic habit to form but it is nonetheless one you should devote some time to internalising. It is all too easy to shop without much regard for the end cost, especially with supermarket shops where treats and non-essentials often find themselves in your shopping trolley. But a shrewd approach to buying can slash your weekly expenditure by much more than you might initially think.
Indeed, shrewd shopping can become something of a game to play with yourself or your household. Rather than relying on the same deals, you can challenge yourself – and your arithmetic – in seeking the best possible alternatives for that week. Of course, such price-hunting can be a time-consuming process, and there comes a point where the savings quite simply won’t be worth the time.
