Wouldn’t it be nice to have an extra £250 a month or more to put away for a rainy day? If you’re managing to save this every month, you could build a savings pot of £3,000 after just one year which, if invested sensibly in a tax-efficient wrapper like an ISA, could grow to be worth more than £10,000 over 20-30 years.
If you repeat this process every year, you could quickly build a sizeable savings pot with minimal effort. With this in mind, I’m going to outline my three tips that could help you save £250 a month, or more than £200,000 if you keep at it for 30 years.
Go shopping
My first savings tip is to double check all your existing subscriptions and bills. Ask yourself, do you still need that magazine subscription or can you get a better deal on your phone and energy contract elsewhere?
According to Moneysupermarket.com, the average customer can save £331 a year by switching their energy supplier, a saving of around £27.60 per month.
If you think shopping around and looking for better deals on all of your subscription and bills sounds like hard work, think of it this way. The national minimum wage for workers over the age of 25 is £8.21 per hour, implying the average monthly saving on offer by switching suppliers is equivalent to more than three hours of work at this rate.
Don’t outsource
My second tip is to avoid spending money on items such as takeaway coffee and lunch. In London, it’s quite easy to spend £10 a day on coffee and sandwiches (although if you go bargain hunting, you can spend a lot less) and, over time, these small expenditures really add up. For example, £10 a day on lunch works out at £50 a week, or £217 a month.
Preparing your own lunch and buying instant coffee could significantly reduce this expenditure saving you what could be hundreds of pounds every month.
Government help
My third and final tip is to make the most of the cash bonus offered by the recently introduced Lifetime ISA. For every £1,000 you contribute to a LISA, the government adds a bonus of 25% up to a maximum of £1,000.
You can only contribute a maximum of £4,000 every year, but that’s still £1,000 in free cash. This means for every £200 you provide, the government will add an extra £50, giving you £250 a month in savings.
What’s next?
The best way to get the most out of your £250 monthly savings is to invest it, according to my calculations. By investing your money, you can seriously improve your returns compared to just leaving it in cash.
Today, potential investors have a range of different tools they can use to get exposure to equity markets all around the world. And if you are just starting, I recommend buying a low-cost bond fund to keep your money safe while you learn about the market. Some bond funds on the market today offer yields of up to 5%.
If you want to take on a bit more risk in exchange for higher returns, you could invest your money in equities.