The Financial Foundations: Making sense of saving

Saving sounds simple. Pick a product and put a little money away every month. But, as with most things, it’s never quite that easy. There are always costs on the horizon, and then there’s the question of how much you should save. And where should you keep it?

These are all things I’ve asked myself recently, having spent the last three years saving for my first home. Through trial and error, I have learnt lessons about saving that go beyond simply finding an account with a good interest rate.

One of my first realisations was that I’m great… at spending money! Initially, I tried to save whatever was left at the end of the month, only to find that most of the time there wasn’t much left to save. So, I changed my approach and started saving as soon as I was paid.

For me, automating this made a big difference. The money went into savings before I had the chance to spend it, rather than relying on me to make the decision at the end of each month. Having a specific goal helped too. Knowing I was saving for my first home made it easier to see the money as something I was working towards, rather than money I was simply giving up.

As the house purchase got closer, I gradually increased the amount I was saving. I expected to feel the difference, but I didn’t. I could still go out, enjoy myself and pay for the things I wanted to do.

It made me realise that the amount I spend isn’t necessarily the amount I need. If I leave more money available, I seem to find ways to spend it. If I save it first, I generally don’t miss it.

There is, of course, a balance to find. If saving more starts to have a noticeable impact on day-to-day life, that may be something to review. But my experience was that sometimes the easiest money to save is the money you never give yourself the opportunity to spend.

Where should you keep your savings?

Saving is generally about putting money aside for short- to medium-term goals, where stability and access are important. This could be an emergency fund, a holiday, or a house deposit in my case.

Once you know what you’re saving for and when you might need the money, the next question is where to keep it. The main trade-off is often between access and the interest rate available. Easy-access accounts offer flexibility, while notice and fixed-term accounts may offer higher rates in return for giving up some access.

It is also worth looking beyond the headline rate. Some accounts offer introductory or bonus rates that change after a set period, while inflation can reduce the purchasing power of your savings if the interest earned is lower than the rate of inflation.

Ultimately, the right option will depend on what you are saving for, when you might need the money and how much access you require.

Below is a summary of some of the options available, along with some important things to be aware of.

Savings Products:

Specialised Products:

Please note: The information in these tables is correct at the time of publication and may be subject to change.