Aviva’s essential guide to savings

So, whether you have a goal in mind like a house or retirement, or you just want to save for an unexpected rainy day, savings can provide the freedom and flexibility to handle whatever life brings. 

Setting savings goals can help you not only stay motivated, but it also gives you a clear reason for saving. Common savings goals might include holidays, a house deposit or an emergency fund.

Different kinds of savings goals

Savings goals come with different price tags – retirement being considered as one of the biggest. So, it helps to divide your savings into short, medium and long-term goals to keep on track.

Short-term savings

Generally, these would be things you can save up for in 12 months or less. So that could be something like putting money away for a holiday or saving for a new games console.

Medium-term savings

You should mentally prepare to be saving between one and five years to hit medium-term goals. This might be for saving for something like a new car or a deposit on a new home.

Long-term savings

Retirement is a major long-term goal. You might start saving for it from the beginning of your working life, right through to the end.

You don’t even have to only be saving for one thing at a time, you might have different pots of savings for different things with different time frames. You might have a short-term goal to save money for a new phone, and a medium-term goal to save a certain amount to go towards your wedding.

There are plenty of different ways you can save money, it all boils down to how it works best for you. Once your goals are SMART and you’ve thought through the hows and whys, you can start exploring saving strategies.

By using things like savings challenges you might feel more motivated when it comes to saving, as it turns it into a game. This can make them easier to stick to.  

50/30/20 rule

This super simple strategy splits your income into blocks of 50, 30 and 20. Once you’re paid, 50% should go towards your living expenses so things like your rent, bills and insurance, 30% on non-essentials like gym memberships and eating out and then the final 20% should go into savings. This way you’re still saving, but you’ll still be able to enjoy yourself.

Save your pennies

Some banks have a process where when you make a purchase, the ‘pennies’ get rounded up and moved into a nominated savings account. So, if you go shopping, and spend £6.80, 20p will automatically go into your savings. Meaning you can save without even thinking about it.

1p savings challenge

This spans over a year and you start on day one by saving 1p, day two it’s 2p, day three its 3p and so on. By the end of the challenge, you’ll have saved £667.95. A lot of people like to start this at New Year so it’s easier to follow, but you can start from any time.

You could also swap this out with any amount of money that’s suitable for you. You might swap it to the £1 challenge if you’re trying extra hard!

100 envelope savings challenge

To do this one you’ll need 100 envelopes, and a pen. You number each envelope 1-100, and then you shuffle them. On a daily, weekly or even monthly basis you pick a random envelope and fill it with the corresponding amount of money inside it. Once all the envelopes are filled, you’ll have saved £5,050.

Saving isn’t always easy; it takes a lot of determination and focus to make sure you hit your goals. Here’s our five common savings mistakes:

1. You don’t spot extra fees

Certain purchases may come with extra fees that only show up after you’ve paid.

For example, that holiday might seem like a great deal based on flights and accommodation alone, but once you factor in travel insurance, airport transfers, baggage fees, and excursions, the total cost can end up much higher than expected. These extras can turn what looked like a bargain into a bigger expense than planned.

2. You don’t review your finances

We know, it’s not the most exciting task in the world. But reviewing your finances regularly can pay off in the long run.

Reviewing things like your direct debits, or shopping around for better deals on things like your broadband can help you get closer to your savings goals even quicker.

3. You dip into your savings

We’ve all been there, just dipping into your savings to buy those trainers you’ve wanted forever that finally went on sale. But dipping into your savings can be more damaging than good. Frequently taking amounts from your savings could have the opposite effect on saving towards a short or long-term goal.

If you’re one of these people, accounts with restricted access might work better for you as a deterrent to keep you focused on saving.

4. You don’t have a separate emergency fund

As well as saving for specific things or life events, you should have a separate emergency savings fund. This is there for if your boiler packs up, or your car breaks down, stopping you from having to dip into your savings for things you couldn’t help happening.

5. Not having a clear goal

Just saving for the sake of saving can make it more difficult to stay motivated or track your progress. Keeping separate savings pots with different goals in mind can help you clearly visualise exactly what that money is there for and what your target is.

There’s a wide range of different products out there to help you save money, and a lot of them might be aimed at specific areas of saving.

Before saving or investing, it can be worth consulting your options with a financial adviser, as they’ll be able to talk through your options and advise on what type of account will be the best option for your circumstance. They can also find the best deal, taking away some of the legwork. And if you decide to invest, the adviser will be able to manage this for you and move things around if and when necessary. It is worth noting that advisers will charge for their advice.

Making the decision as to whether you should save or invest can be a tricky one, as both come with their own sets of pros and cons.

But there are also a few key differences between saving and investing:

Risk

• If you’re saving there’s little to no risk. As long as your savings are covered by the FSCS you’ll be protected for up to £120,000 per person, per banking group if your provider goes out of business. But inflation could reduce the spending power of your savings.
• Investments can also go down as well as up and you may get back less than you put in.

Purpose

• When saving you might have a shorter-term goal in mind, or you’re saving for emergencies, like having cash upfront for unexpected events.
• Investing is typically suited to goals that are at least five years away, like retirement or buying a home.

Access to your money

• Some savings accounts can give you instant access to your money. Whereas others might not allow you to take money out till the term ends, or they might need you to give some notice before you can get your money.
• Investments can take days for any cash to be paid to you as they need to be sold.

Growth

• When saving your money will grow steadily and slowly, but you can work out exactly how much you’ll have at the end of a period of time.
• When investing your money can decrease in value quickly, but it also has the potential to grow just as quickly.

There’s never a wrong time to start saving or investing but making sure you’re doing it in a way that’s realistic to your SMART goals and fits your current financial situation is key to staying consistent and confident in your progress.

Savings accounts come in all different shapes and sizes, each offering their own levels of access to your money and varying interest rates. Whether you’re looking for flexibility or aiming for higher returns, it’s important to pick an account that suits your own savings goals. The main types include fixed-term, notice, easy/instant access accounts, each designed to meet different needs and preferences. 

Fixed-term savings account

A fixed-term savings account allows you to set aside money for a specific period, this typically ranges between one and five years. Once you make your initial deposit, you’ll benefit from a fixed interest rate that remains unchanged throughout the term. Usually, these accounts will require you to lock in your funds, meaning you won’t be able to access them until the term ends, unless you’re willing to accept a reduced interest rate or withdrawal penalty. In return, fixed-term accounts often offer some of the most competitive interest rates on the market, making them a good option if you can afford to save without needing immediate access to your funds.

Notice accounts

With a notice account you’re able to withdraw money whenever you want but you’ll need to give notice. Notice periods can range anywhere between 30 to 180 days, depending on the account and provider. If you don’t give notice that you’re going to withdraw, there’s usually an interest penalty to pay. They usually have higher interest rates than easy access accounts, as an incentive for you to keep your money in the account for longer periods of time. But these rates can also go up and down.

Easy/instant access accounts

Instant or Easy access accounts are what are commonly thought of as just normal savings accounts. You get the flexibility to withdraw your money as and when you need it, but it can sometimes vary between it being instant or taking a couple of days for you to receive your money. They offer varying interest rates which can go down or up based on market conditions. Commonly, these accounts offer lower interest rates compared to fixed-term as a trade-off for being able to access your money whenever you want.

ISAs

Individual savings accounts (ISAs) are a way to save or invest money in a tax-efficient way. This means you won’t pay tax on any interest, gains, or returns you earn within the ISA.

In the 2025/26 tax year, you can save up to £20,000 across all ISAs (excluding Junior ISAs, which have a separate £9,000 allowance).

Tax benefits are subject to change and are dependent on individual circumstances.

ISAs are also versatile, some allow you to invest, while others are focused on cash savings. It’s worth noting that outside of an ISA, savings interest may be subject to tax depending on your income and how much interest you earn, which is why ISAs can be a useful option for many savers.

Cash ISA

A cash ISA lets you save money tax-free and typically offers either a fixed or variable interest rate. Some work like fixed-term savings accounts, where you leave your money in for a set period, usually one to five years, in exchange for a guaranteed rate. Others offer instant access, giving you more flexibility to withdraw your money whenever you need it.

Lifetime ISA

If you’re aged between 18 and 40 you can use this ISA to help you buy either your first home or save for your retirement. You can pay in a total of up to £4,000 each year and the government will add a 25% bonus as a top up. This means you could receive up to £1,000 extra annually. You’re able to either keep your money as cash, which will help you earn tax-free interest, or you can invest it, which could increase your returns over time.

Stocks and shares ISA

Stocks and shares ISAs allow you to invest in the stock market through funds, or shares. It can be a good option if you’re happy to put your money away for potentially up to several years at a time. Your provider might also offer ready-made investment funds to help get you started if you’re not an expert in investing. Investing is typically for the long term (usually at least five years), helping you ride out market ups and downs. While returns aren’t guaranteed and your capital is at risk, a longer investment gives your money more time to grow and recover from any short-term volatility.

Innovative finance ISA (IFSA)

With an IFSA you lend money to, or invest in, a company through debt-based instruments with the hope of receiving a higher return. These are considered quite a high-risk investment as you are relying on the borrower’s ability to repay. If the company defaults or underperforms, you could lose some or all of your capital. You also won’t be protected by the Financial Services Compensation Scheme (FSCS), so you might not receive compensation should anything happen. So, it’s important to carefully assess the risks and only invest what you can afford to lose.

Junior ISA (JISA)

A junior ISA or JISA is another type of ISA that can be opened by a parent or guardian of a child to start saving money for their future. Then when your child turns 18, they’ll receive full access to their money and the JISA will then turn into a normal ISA. It allows payments from both family and friends into it so can also help support your little one. You can choose between different investment styles with varying levels of risk, meaning you can tailor it to your own needs.

ISA calculator

With our ISA calculator you can work out how much your investment could be worth in the future. Just enter how much you want to invest, whether it’s a one-off payment, regular contributions, or both. Then let us know how long you plan to invest and what kind of growth you’re aiming for. We’ll then show you how much you could end up with by the end of your investment period.

Investing accounts are there to help you grow your money over time through stocks, bonds, funds and other assets. They’re higher risk than savings accounts but this comes with the potential for higher returns. We’ll be discussing a few different products, general investment accounts, bonds and pensions.

General investment account (GIA)

A general investment account or GIA is a way of investing that you can shape. You can choose from ready-made funds and set a level of risk you’re comfortable with, or you can pick out your own individual funds or shares. There’s no limit to how much you can put in each year, so you might choose to pair this with your ISA if you think you might go over your £20,000 ISA limit.

Unlike ISAs, however, with a GIA you might have to pay tax on any returns you make, depending on any other income you have.  

Bonds

Although bonds aren’t as popular as they used to be they are still a form of investing. Bonds can be passively or actively managed. If they’re passively managed then they will try to follow an index like the S&P 500, or if actively managed the fund manager will group together assets to try and outperform the benchmark.

They work similarly to other investment products: you pay in, your money is invested, and its value can move up and down in line with market conditions. When you decide you want to start taking money out, you’ll only pay tax when you’ve triggered a ‘chargeable event gain’. This happens when you take out more than the available 5% allowance, which is calculated on the amount you’ve put in, within a year. If you do this, or if you cash in the bond, you may have to pay tax on any gain you’ve made.

Pension

Pensions are a long-term savings product that are designed to help you build up a pot of money for your retirement. You can contribute regularly during your working life and your money will then be invested in funds, shares or other assets with the aim for your money to grow over time. These investments can also be either passively or actively managed. There are a few different types of pensions, including workplace pensions, personal pensions and self-invested personal pensions (SIPPS), each product offers varying levels of control and flexibility.

Pension contributions benefit from tax relief, meaning the government adds money to your contributions. So, for every £100 you invest, you get £25 tax relief on top of that. If you’re a higher‑ or additional‑rate taxpayer, you can claim back even more tax relief through your self‑assessment tax return. Because you receive tax relief, there are also rules on how and when you can access your pension. You’re unable to withdraw any of the money until you reach a certain age, currently 55 (rising to 57 on 6^th April 2028), and when you do, you’ll be given options as to how you can take that money, each with their own tax rules.

Pension calculator

Our pension calculator can tell you three big things about your pension:

• the pension pot you could have when you reach your chosen retirement age
• how the different options on taking your pensions effects your income
• how much of a tax-free lump sum you could take

Other than some personal details all you’ll need is the current value of your pension(s), how much you (and your employer if applicable) pay into them and when you plan to start taking money from your pension.

Investment calculator

If you’re wondering how much you could save by investing, you can use our investment calculator to help get an idea what your money could look like in the future. This can be a great way to stick to your plans. Or work out if you need to be adding more each month to reach your goals.

Compound interest calculator

Compound interest is when you earn interest on both the money originally saved, and the interest that the money has already earned. So, over time this creates a snowball effect, because each year your balance grows a little faster than the year before.

For example, if you started out by saving £100 and you have a compound interest rate of 5% added annually, then in the first year you'd earn £5 in interest, giving you £105. In the second year, the 5% interest is applied to £105, not just your original £100, so you'd earn £5.25 and you end up with £110.25. Each year your balance grows a little faster because you're earning interest on your interest.

If you'd like to find out how much your savings could grow thanks to compound interest, take a look at our calculator.

Saving when money is tight can feel challenging, but small steps can help you build financial stability over time. It’s not always about setting aside large amounts, but finding simple, realistic ways to make saving part of your routine.

You could start by looking at your everyday spending. Making small changes like using budgeting apps or using some of our savings’ tips could make a difference without feeling overwhelming. These habits can help you build momentum and confidence in your ability to save.

There’s also additional support available. Government schemes like Help to Save ^{Footnote [1]} offer a type of savings account to those on Working Tax Credit or Universal Credit. You can save between £1 and £50 each calendar month, and for every £1 you save you’ll receive a 50p bonus. You’ll receive your bonuses at the end of the second and fourth year of the account being open. And at the end of the fourth year the account will close.

Most importantly, consistency is key. Saving a small amount regularly, whether it’s weekly or monthly, can add up over time.

So, whether you’re planning a holiday, buying a home, or just building a financial safety net, saving takes teamwork, communication and a bit of planning.

Set shared goals

Start by sitting down and talking about what you’re saving for. It might be something short-term like a new sofa, or long-term like your children’s education. Once you’re aligned, you can set clear goals and timelines that work for both of you.

Talk openly about money

Talking about finances can be uncomfortable, but it’s important to be honest and open. Setting regular check-ins to review your budget, savings progress and any changes to your financial situations. This will help avoid misunderstandings and keep you both on the same page.

Get the kids involved

If you have children, get them involved in the process! You could give them a piggy bank or open them a JISA. You could also use visual tools like charts or jars to help show how saving works. Teaching them to save early will help build lifelong habits.

Use joint savings accounts

Some bank or buildings societies allow you to open join accounts which can make shared finances easier. It will allow both of you to contribute and track your progress in one place. Some accounts even offer features like ‘Save the pennies’ or automatic transfers, which can help you save without even thinking about it.

Try savings strategies together

Using strategies like the 50/30/20 or other savings challenges, can make saving a bit more interesting. Turning it into a fun competition, or a race can help build momentum when trying to save. 

As you go through life, what you’re saving for will change as you hit different milestones or events. From buying your first home to your retirement, saving is something you should try and always keep on top of.

Education

Saving for education, whether it’s your own or your child’s, can feel like a big commitment. But breaking it down into manageable steps can make it more achievable. Just because you have a student loan doesn’t always mean you’ll be covered for all of your expenses while studying. So, sitting down and working out how much extra you might need to help get you through studying could be important. After you’ve worked that out you can then set a realistic monthly savings goal based on your target and timeline. You can then investigate different products that can help aid you getting to that goal as quickly and efficiently as possible.

Traveling

Whether you’re planning for a 2-week getaway or you want to travel for a longer period of time, saving is all about planning and staying consistent. First, start by estimating your total costs, flights, accommodation, spending money, and extras like excursions and travel insurance. Then you can break that total down into monthly or weekly savings goals. You could set up a separate savings pot dedicated to saving for travel, making them easier to track. The earlier you start, the more flexibility you’ll have – getting you one step closer to your dream holiday.

Buying a home

Buying your first home can be one of the biggest financial milestones you ever make. Saving for it takes planning, patience, and consistency. Start by researching how much houses cost in the area you would like to live, from that you’ll be able to work out how much of a deposit you would need to save.

Typically, people try to save between 5 and 20% of the property’s value, but the higher the deposit you have, the less you’ll pay monthly in mortgage repayments. You’ll also need to think about legal fees, surveys and any moving costs or work that may need to be done to the property when you move in. Products like the lifetime ISA are there to help you save for your deposit faster, helping you save quicker while getting that additional boost from the government. If you’re buying with a partner, having a separate savings pot for your deposit and extra costs can help you both stay on track.

Getting married

Weddings are coined ‘the happiest day of your life’ – but they do come with a price tag. Starting a wedding savings plan sooner rather than later can help reduce stress and avoid debt. Once you have an idea of what you want your wedding to look like you can start getting quotes to find out the rough cost of everything. You could then use a journal or spreadsheet to manage costs and monitor your progress as you get a step closer to your big day.  

Saving for retirement

Saving for retirement is a whole different ball game, as in most cases you’ll start saving at the beginning of your working life, all the way till the end of it. Meaning if you started working at 16 and retired when your state pension kicked in then you’ll have been saving for more than 50 years! Knowing what kind of lifestyle you would like at retirement can help you work out how much you might need to save, but this also needs to be realistic.

If your employer is paying into a workplace pension for you, you could start there or you could also have a private pension that works along side it.

End of life planning

Although it’s not the nicest thing to think about, end of life planning is a super important aspect of saving. Preparing in advance can ensure things hare handled smoothly when the time comes. You can start by looking at your finances in two categories, expenses and incomes. Expenses being things like funeral costs, legal fees and any outstanding debts you may have. And incomes would be things like your pension, life insurance or funeral plan payouts etc.

Creating a will and keeping your financial documents organised is just as important, helping make sure your wishes are followed, and everything is settled without confusion.

Find out how much you could set aside for the funeral you want using our funeral cost calculator.

Saving is a journey, with no one-size-fits-all option. From short-term goals to long-term planning, the key is consistency, clarity and choosing the right tools and strategies to help you support your financial wellbeing. Whether you’re saving solo, with a partner, or as a family, small steps can lead to big changes. And remember, there’s no perfect time to start, only the decision to begin.