Ask an adult: How to have savings when you’ve got no money

This appeared on The Debrief June 2015

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Hands up who knows that feeling when it’s three days into the new month, you’re completely broke and back to living on value pack baked beans – maybe with a sprinkling of cheese if you’re feeling flush – and payday feels like a millennium ago? Good… I’m glad I’m not the only one.

We are the generation which expects instantaneous gratification for everything we do; twenty likes on an Instagram post, a retweet from a witty remark and we feel like we’ve made it. It seems the most we can ever hold out for is a loyalty stamp card to earn a free coffee, so how are we ever supposed to survive the long slog that is saving money when we have so little to spare in the first place?

I think the very best and simplest piece of advice to follow is to take a bit of time to organise your finances. Establishing where each and every one of outgoings falls into one of three categories will enable you to recognise where there are savings to be had.

It can be difficult to change the amount of money you have coming in – but you have much more control over what goes out.

So here we have the three categories.

The essentials: the things you HAVE to pay for with no negotiation (sadly), these are the likes of your rent/mortgage, council tax, any student loan repayments… you should immediately deduct these costs from your monthly income and then you’ll have a crystal clear idea of exactly what you have to play with over the next month.

Savings to be made: Zilch. Soz. So just have a quick sob and move along. 

The everyday costs: the sorts like transport, internet access, food. Hold on there, carbohydrates and Wi-Fi aren’t crucial to our existence? Well yeah they are but you can be smart about allocating your hard-earned money and choose where to scrimp and where to splurge on the everyday things.

You’ve got to make your way to work somehow so why not sweat it out walking to work rather than take the number 42 bus and pocket the change you’ve saved. This will double-up as exercise too so you can cancel that expensive gym membership and say hello to another £40 a month you’d usually never see.

Shop around for the best deals on your internet provider. For an example I used my own address to get some quotes on broadband and they were anything from £4.50/m to £25/m.

Savings to be made: £70 per month

The luxuries: here’s where you need to weigh up your YOLO mentality of splashing the lot with your desire to actually put some money behind you.

It sucks to think that you should class hanging out with friends as a luxury but when your usual scene is a bar and an Uber ride is your preferred method of transport 4 nights a week, these outings take a serious hit on your bank balance. And how about your morning coffee? At £3 a pop that’s £15 a week (Mon-Fri) which equates to £60 a month! Make a coffee at your desk and put the change you would have spent to one side. Every month the money that would have gone on your caffeine fix can be deposited into your savings and you’ll have yourself a nice little earner there in no time.

Savings to be made: A ton! As Paddy McGuinness à la Take Me Out would say in a thick Northern twang; ‘the power is in your hands’. 

So once we’re in the right mind frame to save how do we go about getting the biggest bang for our buck?

It feels like we’re always having it drilled into that an ISA account is the secret to successful saving but in fact it seems that this may not be the solution after all.

Nicolas Frankcom, money expert at uSwitch.com, told me: “With interest rates at an all-time low, savers need to take advantage of the few places that will make the most of your hard earned cash. It might sound strange, but a current account is actually the best option for many. While the best ISA on the market offers just 1.5% interest, current accounts offer rates of up to 5%.’

Apparently we 20-somethings are ahead of the game when it comes to saving as we are the ones moving away from the traditional savings account or ISA in favour of our current accounts so there might be hope for us yet.

He explained ‘If you’re planning on following the trend and moving your money to a current account, the best ones to consider are the Nationwide FlexDirect, which offers 5% on savings up to £2,500 as well as a 12-month fee-free overdraft, and theTSB Classic Plus, which offers 5% interest on savings up to £2,000. If you’ve got plenty of savings, the Santander 123 Account pays 3% on balances up to £20,000, which even after tax is better than an ISA. By being a savvy saver you’ll be able to spend more on the stuff you really want.’

In my own experience of saving I’ve found the best way to enforce any strict saving rules was to transfer any money I aimed to save that month straight into another account on payday. This way I knew what I was allowing myself to spend that month and once it was across in my savings I didn’t allow myself to touch it. Out of sight, out of mind and all that. Also, in the time it took to write this article I received six separate emails from my favourite online shopping haunts trying to entice me in and reignite my urge to shop. Do yourself a favour and unsubscribe from those emails.

Paige, 24, a teacher, confirms that organisation and determination is key to saving money. She said ‘I have my wage paid directly into my savings account and then I withdraw a set amount each month to cover all my monthly bills and any small expenses but the rest I don’t touch. I also write down my monthly targets so I know how much I want to reach and by when. You will be far less likely to want to touch your savings once it starts adding up and you see a nice round number.’

She added ‘every little spend I make I write down, just make little notes in my phone and I’m able to see exactly where my money is going plus it kind of scares me into making some changes when I see the money I didn’t need to spend.’

In an ideal world saving £100 a month will make a real difference to your finances as you’ll have over a grand in a year but even if you just manage to squeeze £20 here and there, it all adds up and you’ll have money behind that you wouldn’t have if you were still spending every last penny you made.

Our culture was born from envying others and it’s only natural to feel the need to aspire to greater but this often comes at a cost. Just remember that you don’t know anybody’s financial circumstances; yes they’re living out the life Instagram was made for but they also might be up to their eyeballs in debt. So you go ahead and sit there quite smugly in your dressing gown with the tenner you’ve saved from opting out of a take-away. Yes we are consumers but everything in moderation, please.

And to paraphrase Kate Moss, nothing tastes as good as a full bank account feels.

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