Saving for a purpose
Putting money away for something specific
Having a goal is great motivation for keeping to a savings plan. It will also
make you think about the way you spend money. Getting into the habit of saving up
to buy something when you can afford it, rather than sticking it on your credit
card, is an important part of good financial planning. Its cheaper than using
credit cards or loans, as you won't be paying interest, which, if its for something
like a holiday, will make it all the more enjoyable.
Planning a holiday
Saving up and then paying for your holiday in one go is a great way to spread
the cost of it without it costing you extra (as it could on a credit card if you
didn't pay it off in one go). Put some money aside each month in the run up to
your holiday to pay for it, and to save towards your spending money for when you
go. It will also make it less likely you'll feel that post-holiday pinch when
you get back. Its a fairly short-term saving goal, so you could look at putting
the money away in an account where you can access it instantly, or that requires
minimal notice. Work out how much you're likely to spend on booking the holiday
itself, how much spending money you'll need, and how many months until you plan
on going so you can work out a monthly budget to save. Setting up a standing order
will help make sure you stick to it too.
Saving for a new car
If you're likely to need a new car, the best way to pay for it is to save for it.
Loans and hire purchase agreements add on a lot to the purchase price of a car. Plus,
as cars go down in value, its money you're unlikely to get back. And if you can pay
in cash, you may be able to negotiate a better deal.
Shop around and see how much the car you're aiming for is likely to cost, factoring
in insurance and tax, and any money you'll get for your existing car if you're selling
that or thinking of part exchanging it. The price of new and used cars can vary
enormously. If you can leave the money you save for a year, it may be worth looking
at an ISA or a regular saver account. And if you won't need immediate access to it,
you may get a better rate of interest from a notice account.
Putting money away for a childs education
Its never too early to start planning for your childs education. And with
university fees on the increase, saving is the best way to pay for it. The chances
are, by the time your child is old enough to go to university, you'll be closer to
thinking about retirement and won't want the added financial pressure of having to
work longer to fund an education. The sooner you start, the easier it will be and the
more choice of savings and investment options you'll have. If you can leave the money
for three years or more, you may want to consider an investment or fixed term savings
plan.
Planning for a wedding
Most of us don't have the money needed to pay for a wedding stashed away under the
mattress, so whether you're planning to pay for your own wedding, or your childs
saving towards some or all of it may save you money in the long run. Of course, there
are loans and credit cards, but starting off married life with debts is not ideal, not
to mention the interest payments that will add a significant amount to the overall cost.
If you're planning for your own wedding, work out a budget, shop around and start a
savings account you and your partner can pay money into. Be sure to make use of free
planners available online or in magazines.