Tips for making your money go further
Whether you are heading to university or getting ready to retire, it's never too late to learn the financial habits that will help you keep more of your cash. Don't put it off any longer with our tips for saving money.
Create a budget
The first step on the money-managing journey is to create a household budget. It will allow you to see where you are spending your money and where you need to cut back.
It's never been so easy to keep a budget, as modern technology can now do the hard work for you. You can even do it on the go through smartphone apps, meaning you can stay on top of your finances wherever, whenever.
For example, the free Toshl app - available on iPhone and Android - allows you to input your income along with expenses to ensure you stay within your budget, and will export what you've created straight to your computer. Alternatively search online for a household budget template.
Budgeting will also give you the chance to see if you have any extra cash in your current account, which could work harder for you. For example, you could 'sweep' the extra cash into a savings account that pays more interest. You can set this up automatically, so that at the end of each month your bank will take whatever is left above a certain limit and transfer it into your savings account.
If you don't want an automatic sweep, Andrew Hagger, founder of Moneycomms.co.uk, says: "You could set up a monthly standing order to a savings account of your choice for a fixed amount each month and then make a diary note on your phone or iPad on pay day to see if there is any surplus you can switch across."
Get the best rates
Despite the pathetically low rates currently being offered to savers, it is important to get into the habit of checking the interest you're getting from your bank, as it could cost you thousands of pounds a year. Anna Bowes, director at Savingschampion.co.uk, warns that a saver with £50,000 in an easy-access savings account could be losing out on £8,000 a year by placing their money in a poor-paying account.
She says many consumers are guilty of inertia when it comes to their accounts. "You open an account, which was no doubt fairly competitive to begin with, only for it to dwindle to uncompetitive levels over time. You may be aware that the rate has dropped or even if you aren't, you possibly can't be bothered with the hassle of moving," she explains.
This is particularly the case with accounts that come with bonuses. Bowes adds: "The banks and building societies are hoping that you have other things to do when your bonus period comes to an end, with your rate potentially plummeting with it. Using an account with an introductory bonus has become a way of savings life these days but don't let the providers enjoy the spoils of your inertia."
The same is true with fixed-rate bonds, so when the product matures ditch and switch. Switching is one of the easiest ways of getting the best deals from bank accounts, as loyalty is rarely rewarded. "For many providers, getting new customers seems to be their prime focus, while you're lucky if they chuck loyal savers some scraps," Bowes says.
And she warns not to be tempted in by 'preferential rates', as you can usually get better rates elsewhere."
Switching should not just be confined to bank accounts. According to uSwitch, you could be missing out on hundreds of pounds by choosing the wrong energy tariff. The comparison service claims the difference between cheapest and most expensive providers can be in excess of £200 a year.
Energy expert at uSwitch Jo Ganly warns there are still many consumers who are paying too much on their energy bills. "The average household energy bill is £1,353 a year and yet six in 10 households have never switched and three quarters of us are still sitting on suppliers' old-fashioned and expensive standard tariffs, paying far more for our energy than we need to."
Those deals tend to be variable tariffs that are paid by cash or cheque. However, Ganly points out: "Fixed-price tariffs are frequently featuring in the 'best buy' tables, which means that somebody who has not switched for a while could fix their prices, therefore protecting themselves from any future price hike, while also saving money."
Another good habit to get into is to take advantage of cashback. There are loads of ways to effectively get paid to spend - on everything from food and clothes to your utility bills. For example, Santander's 123 current account pays 1% cashback on water bills and council tax. It pays the same on Santander mortgage payments up to £1,000, 2% on energy bills, and 3% on mobile, home phone, broadband and TV packages.
Similarly, RBS and NatWest have a cashback scheme for existing and new current account customers that pays 1p for every £1 spent on a debit card.
You could also get money back from cashback websites, such as Quidco or Top Cashback. They work by giving you a cut of the commission they receive when you buy something from online retailers such as Amazon and Tesco via their sites. You can register for free and won't have to share any of your cashback.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Rather than shopping online directly with a retailer, if you go to the retailer via a cashback website (you have to register as a member), when you make a purchase the cashback site gets a commission and rebates some – or all – of this back to you. The cash being paid back to you will vary wildly from site to site and even from product to product, so check you’re getting the best deal before you buy.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.