Saving is difficult. Locking away money which you could be spending right now is a challenge for many of us for a variety of reasons.
Saving is difficult. Locking away money which you could be spending right now is a challenge for many of us for a variety of reasons. When it comes to long-term savings goals, regularly setting aside money can be even more of a challenge! Without any positive feedback, it is easy to get distracted by shorter term goals and desires – pushing your long-term plans even further into the future.
Luckily, there are plenty of tips and tricks you can try to keep your eyes on the prize, and successfully save for your long term goals without getting distracted by what you could buy right now.
Set a Clear Target
The first step towards reaching a large savings goal is simple: name it. Write down what exactly you’re saving for – whether it’s a deposit for a mortgage, a new car, or to clear your debts – and work out exactly how much you want to save. NS&I, the UK government’s savings bank, found that savers with a specific goal in mind were able to save much faster, setting aside an extra £550 per year, on average, compared to those who did not have a clear target.
When considering long-term goals such as these, it’s a good idea to keep inflation in mind. As prices rise, you may need to save more than you initially think.
Let the Bank help
Considering inflation leads us on to our next tip for keeping up with long-term savings goals: make sure you find the best savings account possible. Usually, flexible, easy-access savings accounts will have lower interest rates than accounts with more rigid requirements. You are likely to get the best interest rates with a savings account such as an ISA (Individual Saving Account). ISAs have, in the past, had the best interest deals for savers, but since the introduction of a personal tax-free savings allowance in 2016, they might not necessarily be the best option.
Some ISAs will require you to make a set contribution each month, and for fixed rate ISAs, accessing your funds before the end of its term will incur early access fees, so it is important to make sure you can afford the amount you plan to invest in an ISA every single month for an extended period of time.
Alternatively, Money Saving Expert has compiled a list of some of the best easy-access savings accounts. If you’re likely to have to dip into your fund in a pinch, an account like this is likely your best option.
Keep yourself Motivated
Like all long-term goals, motivation is key. One of the best ways to stay motivated is to make sure you celebrate your progress as you gradually save towards your goal. You might split the amount you ultimately want to save into smaller milestones, and treat yourself to a celebratory dinner, cinema trip, or other small treat to acknowledge your progress so far and encourage you to keep saving.
Your savings are likely to come out of cutting back on your day-to-day spending, which can be difficult to maintain at times. When resisting temptation, or making a particularly challenging lifestyle change, try and remember your ultimate goal! It might be tough now, but just think how satisfying it will be to achieve your goal in the end – which you will if you stick to your budget.
Don’t pay more than you have to on Debts
One area where you could be saving is on debt repayments – you might be spending more than you could be on interest. If you have credit card debt, you could see whether you can transfer your balance to a card with a 0% interest introductory offer. These offers usually last for around 12 months, which is a considerable time to have a break from paying interest! If your debts are unmanageable, though, steps like this might not be enough to break the cycle, and getting out of debt should be your main financial goal, so you are free to begin saving for the things you really want.
If your debt can’t be brought under control by making lifestyle changes and saving where you can, it could be time for a formal solution such as an IVA. In this debt solution, you pay a single affordable payment every month, and write off your remaining debt at the end of the plan. To find out more, click here.
Balance the Long and Short Term
Another way to make sure you don’t get distracted from your long term goals is, ironically, to make sure you save for things in the shorter term too. Splitting your disposable income between two separate saving funds – one for your long-term goals, and one for shorter term goals – will serve you better than putting every last penny towards a goal that’s far in the future.
Saving for goals such Christmas, a holiday, or a new laptop, will ensure you stay committed to saving, since you can see the fruits of your efforts much more quickly. Your shorter term savings goals should also include a ‘rainy day’ fund if possible. If you put all of your money into your long term savings, you’ll be forced to dip into it when unexpected expenses hit, which is bad for your savings and your motivation levels! In the end, slow and steady wins the race when it comes to long-term savings.