How to Start Saving: A Step-by-Step Guide
Saving money is the cornerstone of personal finance success. Whether you’re planning for your first home, a holiday, or building a financial safety net, knowing how to save—and actually doing it consistently—will make a huge difference to your financial wellbeing.
In this guide, we’ll break down everything you need to know about savings, from the basics to practical steps you can take to see real results.
Why is Saving Money Important?
Saving money isn’t just about putting coins in a jar. It’s about building security, enabling choices, and creating opportunities for your future self. For UK readers, with the rising cost of living, unpredictable job markets, and the need to plan for retirement, having savings has never been more crucial.
Key reasons to start saving:
Emergency fund: To cover unexpected expenses like car repairs or a broken boiler.
Life goals: Such as a house deposit, wedding, or a special trip.
Retirement: So you can enjoy life without financial stress later on.
Peace of mind: Knowing you have a safety net reduces money worries.
Step 1: Set Your Savings Goals
Defining clear savings goals is the first key step. Ask yourself: what am I saving for? and how much do I need?
Examples of savings goals:
Short-term: £1,000 for a holiday next year
Medium-term: £10,000 for a house deposit in three years
Long-term: £100,000+ for a comfortable retirement
TIP: Be specific. “Save for a house” is vague; “Save £10,000 for a 10% deposit on a £100,000 flat by June 2027” is actionable.
Step 2: Analyse Your Income and Outgoings
You need to know what you’re working with before you can decide what’s realistic to save.
List your incomes – salary, benefits, side hustles, etc.
List your expenses – rent/mortgage, bills, food, travel, subscriptions, etc.
Actionable tip: Use free tools like MoneyHelper’s Budget Planner or a spreadsheet to get a clear picture.
Identify Areas to Cut Back
Review your expenses and flag “nice-to-haves”.
Cancel unused subscriptions (Spotify, Netflix, magazines).
Switch energy suppliers or mobile phone plans.
Compare insurance costs and shop around (Compare the Market can help).
Even small changes (e.g., bringing lunch to work, switching supermarket brands) can free up cash to save.
Step 3: Decide How Much to Save Each Month
Once you know your budget margin, choose an amount to save that’s both realistic and challenging.
Some experts recommend the 50/30/20 rule:
50% on needs (rent, bills, groceries)
30% on wants (eating out, hobbies)
20% on savings and debt repayments
If 20% sounds high, start with what you can afford—even £10-£50 per month is a positive step. The important thing is consistency.
Step 4: Choose the Right Savings Account
Where you save is just as important as what you save. In the UK, there’s a wide variety of savings accounts, each with features and benefits.
Common options include:
Easy Access Savings Account: Withdraw anytime; good for emergency funds. Rates vary but usually lower.
Notice Account: Slightly better rates, but must give notice (e.g., 30 days) before withdrawing.
Fixed-Rate Bond: Locks money away for a set term (often 1-5 years) at a fixed interest rate.
ISA (Individual Savings Account): Tax-free savings up to £20,000 per year (2024/25 limit). Includes cash ISAs, stocks & shares ISAs, and more. Learn more about ISAs here.
Lifetime ISA: For 18-39 yr olds saving for first home or retirement. Offers 25% government bonus on up to £4,000 per year.
Tip: Compare accounts using MoneySavingExpert Savings Tables.
Renters usually only need contents insurance.
Step 5: Automate Your Savings
Make saving as painless as possible. Set up a standing order so that money leaves your current account as soon as you’re paid. “Out of sight, out of mind” really works.
How to do it:
Log into your online banking app. We like Revolut and Monzo.
Set up a standing order from your current account to your savings account, the day after payday.
Start with your chosen monthly amount.
This reduces the temptation to spend “spare” cash.
Step 6: Track Your Progress
Step 7: Watch Out for Common Pitfalls
Raiding your savings for non-essentials: Try to keep your emergency fund only for emergencies.
Getting a raw deal: Don’t leave large sums sitting at tiny interest rates. Shop around!
Losing momentum: If you miss a month, don’t beat yourself up—just get back to your plan.
Frequently Asked Questions About Saving in the UK
How much should I have in an emergency fund?
Aim for at least 3-6 months’ worth of essential expenses, but any cushion is better than none.
Is my money safe in a savings account?
UK-regulated banks and building societies have deposit protection up to £85,000 per person, per institution through the FSCS.
Can I lose money in a savings account?
Not in standard, regulated UK savings accounts. However, returns may not keep up with inflation, slightly eroding purchasing power over time.
How can I start saving if I have debts?
Tackle any high-interest debt (like credit cards) first, but still aim to put a little aside each month so you don’t need to borrow in emergencies.
Practical Example: A Realistic Savings Journey
Let’s take Hannah, a 28-year-old NHS nurse:
Hannah’s goal: Save £5,000 for a first home in two years.
Monthly surplus: After budgeting, she can spare £200/month.
She opens: A Lifetime ISA for first-time buyers, leading to a 25% government bonus.
Automatic savings: Standing order of £200 into Lifetime ISA on each payday.
Extra cash: Any overtime goes straight into savings for “boost weeks”.
Check-ins: Reviews progress every six months, uses an app to keep motivated.
This step-by-step, automated approach works for people at every life stage.
Conclusion: Key Takeaways & Next Steps
Saving money in the UK isn’t about grand gestures; it’s about steady habits. Start small if you need to, but start now. Set a goal, choose the right account, automate your saving, and review regularly. Even in challenging times, a savings buffer gives you options and peace of mind.
With the right approach, you’ll be well on your way to making saving part of your everyday routine. For more practical guides, keep exploring [Next Steps] for your financial journey.
Step 5: Automate Your Savings