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Good evening again, Money Moose readers. Putting money away is rewarding in the moment when you do it yourself - but it’s worth exploring why one of the strongest moves you can is when you don’t actually need to do anything at all.
We’ve all been there: the salary lands in our account and straight away we buy that item we’ve been wanting for a while, we scour the sales or we head for a well-deserved night out with friends or family.
There’s nothing really wrong with any of that - except for when it happens repeatedly before two things have taken place. First, the key bills and expenses are taken care of, and second, we’ve ‘paid ourselves’.
That first one is the centrepiece of any good budget.
Your must-have expenses - so mortgage or rent, your energy bills, phone bill and so on - are job number one. They are pretty much the same every month, expected, predictable and utterly vital, so they come first.
But after that, paying yourself takes care of two critical issues: it starts building a positive habit, and helps stop potentially destructive cycles of debt.
Developing regular savings habits improves wellbeing, helps people feel more optimistic for the future, sleep better and enjoy greater life satisfaction
One of the most frequent reasons people give for not saving is that they say at the end of the month, they simply don’t have any spare cash to set aside. It’s completely valid: we are often trained to go month-to-month, getting our income from the same place at the same time and living life accordingly in the middle of those payments.
Yet here’s the thing: sometimes, small purchases and repeat spending takes place not because something is necessary, but simply because the cash is there. Obviously, a £5 lunchtime spend isn’t problematic when you’ve still got several hundred pounds in the bank a week or two after payday.
But when there’s still a water bill incoming, or council tax and a kid’s school trip to pay in a week’s time, plus two loads of household groceries to buy before payday, and you have a trip to the cinema and another lunch out and a quick taxi home one night and a coffee with some friends and a top-up shop because you’ve run out of bread and other things…
Spending has a way of spiralling, quickly and almost without us noticing at times, until we get down to the final few pounds which have to last until payday again.
It’s easily done.
Paying yourself first, then - in other words, diverting cash to your savings right away before any non-essential outlay starts - makes sure that you are not spending every free pound, instead boosting your savings on day one.
You don’t have to start with huge sums.
Start with a small amount, even £5-10 is fine to get you started and help adjust your habits.
Watch that build up over a few months and you’ll soon find yourself actively wanting to add another few pounds at a time along the way!
So… how does ‘paying yourself’ work in practice?
Well, step one is to either open a new easy access savings account, or make sure your existing one pays a good rate of interest. Heading into September, that means at least 4%, but it’s possible to get 5% right now (more on those at the end, as usual).
Step two is to make a transfer into it, right after you get paid. If you’re concerned about seeing out the month without running out of cash, make it a small amount first time around, just to get the ball rolling.
Step three is your superpower: Automate the process. Your bank (or building society, or whatever account you’re using) will let you set up a regular payment, for the same day each month, for the exact same amount. Do it for the day your monthly income lands in your main bank account and, just like that, you’re guaranteed to save that amount next month. And the one after. And the one after.
You don’t need to lift a finger (or remember to make the transfer), but your savings grow and so does your ability to handle an unexpected cost without borrowing money - which is exactly what an emergency fund is for.
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Watch your savings pile get bigger each month and you’ll probably notice…
You actively want to add a few more pounds into it along the way, to help it grow faster!
You don’t look at the total for a while and suddenly realise you’ve built up a meaningful pot!
Best of all, you don’t notice the ‘missing’ pounds during the month that you saved on day one!
How else can I automate my savings?
Most bank apps let you ‘round up’ your spending to the nearest pound and send the extra few pence straight into savings. It soon mounts up!
Link an automation app (such as ‘If This, Then That’) to your savings account and choose a reason to automatically add extra cash. Some common examples are “if it rains, move £5” or, if you’re an active person, every time you complete a run or bike ride, the money equivalent of the distance you completed is sent to savings (so £2 for 2km ran, and so on!). Double the motivation!
Money Moose’s Regular Rundown 🫎
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If you started automated saving today, what would the money go towards?
🔝 Best easy access savings account rates:
Cahoot (owned by Santander) offers 5%, but only for savings up to £3,000. There’s no interest paid if you have more than that in the account.
Spring has a very similar product at 5%, for balances up to £5,000.
For no-limit alternatives, you’ve got First Active (4.55%), Tembo (4.55%) and Tesco Bank (4.53%).
💷 Best Cash ISA rates:
A cash ISA is just a savings account where you’ll never pay tax on the interest. However, many have different limitations like only allowing 3 withdrawals in a year, or a bonus top-up rate which ends after 6 or 12 months, so always check which is right for you.
Sidekick (4.61%), Chip (4.6%) and Moneybox (4.57%) have the best rates right now.
👑 Quick-win action for the new week
Sign up to a reverse Monzo 1p challenge, see how long you can keep your streak going for!
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We’d love you to forward us on to them!
That feeling when you’ve saved another £10 to cross off from your Money Moose savings roadmap 🥰 🧡