Thanks to social media, society's expectations can weigh heavy on our minds.
It’s difficult to avoid the latest posts from friends, family or work colleagues announcing their new homes, wedding plans or their fancy new job that comes with a company car.
But for many people, these life goals can feel out of reach. Budgets are being squeezed more than ever before as we continue to battle a cost of living crisis.
In a recent survey from YouGov, 52% of Brits said they were unlikely to be in a position to make a big purchase in 2024. And a similar survey from YouGov revealed that Brits are the least likely worldwide to buy a new car this year, with only 5% saying they would make this purchase.
However, if someone does wish to buy a house or new car one day, there are steps they can take to try and pivot their financial situation.
Of course, the timeline to achieve these goals won’t be the same for everyone - but even the smallest change could make the biggest difference in the future.
Before you even think about setting up a savings account and contributing to the desired life goal, you need to understand your financial situation. This can feel a bit like ripping off a plaster, but trust us - you won’t regret it.
First, analyse your recent bank statements to see how much money is going in and out each month. Then, be honest about any debts, and work out how long it will take you to pay them off. Once you’ve established these key elements, you can create a realistic budget with a clear plan for expenses, debt management and what will be left for savings.
Once the budget has been determined, it’s time to decide which goal you want to achieve. For example, if you want to buy your first house, you’ll need a lump sum of money for the deposit. This can feel like a mountain to climb, but saving little and often can help. It’s always a good idea to try and save a certain percentage of your salary each month, as this will help to grow your savings pot quicker.
A regular savings account can help with this plan as it normally asks for a certain amount each month - which can suit a range of budgets from £50 to £250. Interest rates on regular savers are also competitive, as many current accounts are offering enticing linked savers. For example, existing Nationwide customers have the opportunity to save into an 8% regular saver, which requires a deposit of up to £200 each month.
If you like the idea of regular saving and you’re particularly interested in using savings to buy a first home, then it’s worth exploring a lifetime ISA. This savings account allows you to put up to £4,000 each year, which is £333.33 a month, and you’ll be rewarded with a 25% bonus to your savings. If you save the maximum amount each year, you’ll get an extra £1,000 from the government - result!
However, there are a few rules around using a lifetime ISA, and you’ll only get the bonus if you follow the restrictions. For example, you can only withdraw the money from the ISA if you’re buying your first home or aged 60 or over. If you withdraw the cash for another reason, you’ll be charged a withdrawal fee of 25%.
If you decide to start a savings pot via a regular saver or a lifetime ISA, then it’s also worth setting up an easy access account too. If you would like your savings account to support making a big purchase, then the key is to open more than one.
It’s inevitable that during your savings journey, you’ll have to pay for something that you haven’t budgeted for. This means that you might be tempted to dip into your savings pot - which could lead to withdrawal restrictions and impact the timelines of your goal. Instead, open an instant or easy access account and put a small amount of money into this pot each month for emergencies.
Currently, the top rate for this type of account is Coventry Building Society Triple Access Saver at 5.15%, but only three withdrawals are allowed each year. If you would like to access your emergency fund whenever you wish, Cynergy Bank Online Easy Access Account doesn’t have any withdrawal restrictions and has an interest rate of 5.10%. It can also be opened with as little as £1.
In our latest savings account statistics report, we found that as of June 2023, there were £2.1 billion in accounts paying no interest. Plus, research by the BSA found that 23% of savers don’t check the interest rate before opening an account, with 33% failing to compare interest rates between other accounts.
The secret to using your savings account to reach your goal is to make the most of interest rates. By moving your money to accounts with high-interest rates, you’ll end up with more money in your pot, and sooner or later, you’ll be posting an update on social media too!
Finally, saving for a big purchase is a long game and it won’t happen overnight. Times are tough, so if you manage to save anything each month, don’t forget to celebrate this achievement.
Remember to stay focussed on your goal and if the savings pot starts to grow, keep an eye on the savings market to make sure you are making the most of your cash. Don’t forget to explore fixed-rate accounts if you have a lump sum to save, as this type of savings account has competitive interest rates and you won’t be able to touch your money for a certain period of time.
If you have around £5,000 saved up, Allied Irish Bank Fixed Rate Saver is currently offering a 5.10% fixed-rate for two years, which gives guaranteed interest on your savings until 2026.
As a trained journalist, Lucinda has spent the past 10 years writing and editing content for regional and national titles, including The Mirror, WalesOnline and Manchester Evening News. She is now a personal finance editor and specialises in savings, helping people to make confident financial decisions so they can save for what matters most.