How To Reach Your Savings Goals and Where To Put Your Savings For Quick Growth 1


Many people who have just become debt free find it hard to transition from paying off debt to saving. When people suddenly become free of debt, they have the temptation to spend more than they’ve been used to and have the urge to impulse buy. After all, it feels like a huge weight off your shoulders to finally be debt free so why should you not be allowed to splurge?

Although you would like to break the shackles and go on a spending spree, this notion of living beyond your means can get you back to square one i.e. being in debt. It is important to always keep your finances in check by being responsible about your money.

So what is the next step to financial freedom after paying off debt? And by debt I mean getting rid of bad debt (credit card and other high interest debt) as opposed to good debt (mortgage). Once you have paid off your bad debt, you are probably looking to the next step towards financial freedom which is to build up your savings fast.

Here are three key tips to help you reach your savings goals fast:

1) Treat your savings like a bill – Many people have different ways of saying this – pay yourself first, set up a direct deposit to your savings or force yourself to save. By treating your savings as a bill, you’re forced to contribute to your own future; and rightly so.

When saving, instead of waiting till the end of the month to see how much is left, you should automatically transfer a set amount of money into your savings every time you get paid. By doing this, you ‘force’ yourself to live within a smaller budget to allow your savings to go into an overdrive. It is tempting to spend this money instead but you need to think of your savings goal and how important monthly contributions are to reach it.

2) Contribute all extra money into savings – A lot of people will come across random “extra” money and usually see it as bonus money that allows them to spend it any way they like. Any extra money should be treated as a bonus and this money should go directly for savings – after all you won’t miss what you’ve never had!

That includes everything. Did you get a £50 rebate? Savings. Tax return? Savings. Did you earmark £100 for a plumber but it only cost £70? Transfer that £30 into your savings.

If you receive a £50 gift card from work for a grocery store, use the gift card and transfer the cash equivalent into our savings account. All these small “extra” money savings could transfer into big bucks throughout the year.

3) Reward Yourself – This gives you the motivation to carry on. Whilst you want to be committed to saving, you should also be able to do the things that you love such as travel or have a spa day. So say that for every £5,000 or £10,000 savings goal you reach, you can treat yourself to rewards such as visiting a restaurant that you have always wanted to try or have a spa day. These small rewards act as great motivational tools to keep you committed to reaching those audacious saving goals.

Many articles online state how to save more money but never tell you where to save the money to. Knowing where to save money in this low interest rate environment is extremely important. You want your money to work for you and not the other way round and thus you need to save your money in places that offer a good rate of return.

Below is a list I would recommend on where to put your savings.

1) Keep 3 months worth of expenses in your current account – This together with point 2 below should be your rainy day fund in case you lose your job or your source of income stops. The two are split because the best savings rates or cash-isa are found in accounts where you need to give your bank advance warning if you want to withdraw money. Thus, this 3 months buffer should be adequate to keep you going till you get access to the money in your savings account/isa.

2) Keep 6 months worth of savings in a cash savings account or a cash isa – This should be your rainy day fund in case you lose your job. This 6 months fund and the above 3 months gives you adequate cover for expenses if you lose a job and are looking for a new one. Typically, job hunting used to take 6 months but in this environment it could take up to 9 months so having this 9 month rainy day fund is important.
3) After the above is done, you can now start investing with your savings money. The whole point of this i to make your money work harder for you.

  • Put 80% into stocks and bonds – If you are a novice use Nutmeg as they make the whole investing process easy and simple for you.If you are comfortable with picking your investments, look at this article to see my recommendations.
  • Put 10% towards cash savings – Divert some more money away to your cash savings. This is because investing in the stock market in the point above is a long term game and there are guaranteed to be crashes along the way. What happens if you are short of money when the market bottoms out? The worst thing to do is sell your stocks and that is way this cash amount is very useful
  • Put 10% in a Peer-to-Peer platform – I personally believe that the sharing economy is the future. But trust in ‘sharing’ or crowd funding is still low and that is why I only recommend putting 10% of your savings into a peer-to-peer platform. I would personally recommend Fruitful as you can get 6% interest on your savings.

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