Savings accounts and savings plans can be used to reach your financial goals and give your financial security. These financial products allow you to save in a way that suits your individual circumstances, meaning you can save as much or as little as you like, as frequently as you likeGet financial advice
Why savings are important?
Savings allow you to reach financial goals and the best part is you can save in a way that suits you and your situation. You don’t have to put large amounts away in order to reach your finaincial goals, even a simple savings plan can go a long way to improving your financial situation.
Having savings behind you can help minimise financial stress for both planned and un-planned eventualities. Whether it’s unexpected home repairs, a sudden medical problem, or a life event such as marriage, having a savings plan can ensure you are prepared.
What is a savings plan?
The term ‘savings plan’ really just means what you are going to do to set money aside. In most cases a savings plan will fall into two main categories.
General savings plan:
This is usually a plan you put together yourself to reach financial goals.
A general plan will include budgeting and savings steps. Setting money aside over the short-term will improve your financial health in the long-term.
Some steps might include:
- Having a clear financial goal(s) and adding cash to it at regular intervals
- Budgeting and identifying any non-essential spending that you could cut out. Money saved can go towards your savings goals
- Having a clear objective. This could mean saving a certain amount by a particular date.
Automatic savings plan:
This type of plan is usually an investment product provided by a bank.
Investopedia describes an automatic savings plan as: “A system in which the plan contributor automatically deposits a fixed amount of funds at specified intervals into their account.”
An advantage to investing your savings is the interest you can earn, which helps you make the most of your money. To make this easier to achieve, some banks provide automatic savings plans (which are often confusingly called “savings plans”).
Your financial advisor can help you decide whether an automatic savings plan is the right option based on your personal financial situation.
How to start a savings plan
The best way to start is by having a clear goal that you are saving for. Are you trying to build an emergency fund? Do you have long-term goals like getting married?
By having a clear goal, you know what you need to save and it keeps you motivated but don’t get too ambitious too early. Get some momentum going and build good habits. If your target is too high you could become discouraged and give up saving altogether.
A good, practical first step is to work out how much you have left to set aside for savings once you have paid your bills. The Money Advice Service has a great online budgeting tool to help you keep on top of your finances, you could even write out a list or start a spreadsheet.
Remember, a little can go a long way. Putting aside even a small amount each month can add up and is the first step to securing your financial future.
When to start a savings plan
The sooner the better.
Remember, the great thing about a savings plan is that it fits around you and your financial situation. Whether you start small or save large amounts, the sooner you start the more time your money has to grow.
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