Three fuss-free savings strategies that could put more pounds in your pocket

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We often shop around for deals. And we switch if we find a better offer. So what happens if we apply some of that shopping around and switching magic to our savings?

By Warren Shute, Financial Planner

Portrait of Warren Shute
Warren Shute

It’s no secret that switching things like energy suppliers and network providers can save you money. Headline deals to attract new customers, plus new providers entering the market, provide ample opportunities to put money back into your pocket.

And there are no end of websites helping you search the latest deals, from comparing different companies to handling the entire switch for you with just a few clicks.

But how many of us take the same approach to our savings?

According to Aviva’s recent savings survey 1, not enough: just 14% of respondents said they regularly move their savings around for better interest rates.

Yet a better savings deal can help us save more, feel better about ourselves and help us achieve and exceed our goals – so why should you miss out?

After more than 25 years as a financial planner, here are three tips I’ve learned that demonstrate that making your savings work harder doesn’t need to be a chore.

1. Get into the right savings habits

When you keep a promise to yourself or achieve a goal, you feel happier and more confident. That’s certainly true when it comes to money: regularly saving a proportion of our wages each month becomes a positive habit, one that gives us a sense of confidence and reassurance.

A person in a room with a brick wall dancing and smiling.

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Kick your bad habit 

According to Aviva’s survey, most people have a bad habit: they save into the same account(s) each month and year, rather than seeking a better interest rate. After all, it’s convenient and doesn’t require any extra effort.

Yet with that approach, you could be missing out on higher interest rates that are on offer. By making a few small changes to your savings habits, you could potentially see your savings go up massively. 

Here’s a comparison for you:

Putting £60,000 in a five-year fixed-rate savings account with a 0.1% interest rate will give you £60,300.74 (for a basic rate taxpayer). But moving the same amount of money into a higher interest rate account can make a big difference. If you put that £60,000 in a five-year fixed-rate savings account with a higher interest rate of 1.5% interest rate, you'll end up with £64,670.02 (for a basic rate taxpayer).

That’s over £4,500 in ‘free’ money, just by saving into a different account. Shopping around can help you achieve your savings goals more quickly, and have more money available when you’re ready to spend.

Change your mindset 

It’s not easy to change our habits, but start with the words you’re using and you might be surprised by what happens.

If there’s a part of you thinking that finding better rates is just too much hassle, it will be. Instead, tell yourself ‘I want have X amount saved by the end of the year’ and with just an hour or two’s effort, you could be driving that new car earlier than you’d planned, or have more money for your next holiday.

2. Segmenting helps you save smarter

Strategy is a word more commonly linked with stock market investments than with savings. For example, your pension is split between equity, bonds and other assets, with your asset allocation usually determined by factors such as your appetite for risk and your age.

Short-terms goals in one, long-term goals in another

What happens if you think of your savings in the same way, by allocating your money into different ‘pots’? I learned this from my father who would have a ‘holiday fund’, a ‘house repair fund’ and the essential ‘emergency fund’. Segmentation gives you more control over your money, and can help you make more of it.

If you separate your short-term savings goals (such as a holiday) from your longer-term ones (like your retirement or paying for your child’s education), you can save for them in different accounts and take full advantage of the best rates on offer for each of your savings ‘pots’.

That’s because when you don’t need access to your capital for a long time (as with your long-term savings), you can get a better interest rate by locking your money into a fixed-term account.

Over time, as I illustrated above, those small percentage differences in interest rates can add up to something much bigger. Segmenting your savings lets you make your money work harder.

And if segmentation followed by comparing rates and setting up new accounts sounds like it’s going to be a hassle, think again…

3. Switch for better rates 

Online comparisons have become commonplace in all kinds of transactions now, and bank account rates are no exception. But even after finding better interest rates, switching savings accounts used to require you to make the effort of contacting each provider separately to set up a new account. 

The good news is that with Aviva Save, all the hard work’s done for you. The online marketplace gives you access to a selection of cash savings accounts from UK banks and is designed for people that think switching is a hassle. After you register with Aviva Save once, you can open new savings accounts in just a few clicks, regardless of which bank the account is with. You can compare rates and terms, choose a new account for your segmented pots, and start making more money instantly.

That’s great news for those of us that want better returns with minimum fuss – my dad would have loved it all those years ago!

About the author

Warren Shute

Warren Shute is an award-winner Certified Financial Planner, author of bestselling personal finance book The Money Plan and a Sunday Mirror columnist.

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