With the Bank of England base rate at its highest level since early 2008, you may have a good chance to make more money from your pensions, investments, and savings funds. When the central bank raises its main rate, which is usually used as a standard for loans and savings accounts, it is trying to get people to spend less and save more.
But UK banks and building societies have been accused of not raising their savings rates as quickly as the base rate, which has been going up quickly in recent months. In response to interest rates going up, the UK’s Financial Conduct Authority has told these banks to give “fair and competitive” savings rates.
There are many banks that do have accounts with rates of 6% or more. This is good news for people who save a lot, but only if they keep an eye on the market and switch from items that aren’t as competitive. This is why it’s important to get into the habit of saving money regularly, but many people don’t know how to do that.
My coworkers and I have looked at how people’s savings goals, if they have any, and how they put their money are related. We also looked at how both getting financial help and being “good with numbers” affect this relationship.
We looked at data from more than 40,000 people in 21,000 UK families from five waves of the Wealth and Assets Survey (WAS) done by the Office for National Statistics between 2006 and 2016. This data shows how people feel about financial plans and how well their economy is doing.
Our study shows that it’s important for your finances to save for more than one thing, keep up with financial news, and talk to a professional. Here are five ways to make the most of your money, based on study.
1. Set Specific Savings Goals
Most financial companies and advisors will tell their clients that one of the first things they should do is set savings goals. This is because it’s a good idea to save money regularly. Also, our study shows that the total value of your assets goes up with the number of saves goals you have, and that you do better when you set specific goals instead of vague ones.
Specific savings goals should have an end date, a target amount, and a relevant name, such as “Save £1000 for a trip to Asia in 2024” or “Save £250 for Christmas gifts in 2023.” This will give you real points of reference that will help you be more self-controlled and make it hurt more if you don’t reach your goal.
2. Seek Professional Financial Advice
Instead of getting financial help from friends, family, and social media, you should talk to a professional.
Our study shows that households that get professional financial advice are more likely to put more of their money into stocks than those that get financial advice from friends, family, and social media. This was true even for people with different amounts of wealth and income. For example, people with less money might use ISAs to trade in stocks and shares. Other study has shown that, over the long term, stock portfolios do better than most other types of investments.
We also found that having access to professional financial advice can replace setting goals. This is because your planner should help you figure out what kinds of investments to make (called “asset allocation”) for specific goals and timelines.
3. Brush up on Your Maths
Several studies show that people’s math skills affect how they get and use knowledge, set goals, see risks, and decide which financial assets to invest in. So, you could save more in the long run if you improved your simple math and money skills. You could do this with free online videos.
Our research shows that people who are confident in their math skills tend to be better at planning their finances. For example, they tend to spend more in stocks and bonds than cash, which is riskier but has the potential for higher returns. This trend is especially clear in families that don’t have any savings goals, which suggests that being good with numbers could make up for not having savings goals.
4. Adopt Appropriate Savings Strategies
Long-term, diversified stock market portfolios usually do better than bonds and cash funds. But stock markets can be unstable, so if you want to save money for less than five years, you should put it in less dangerous assets like bonds and cash.
Long-term investments in different stock markets around the world for more than five years can help fight inflation. And exchange traded funds, which are based on indices of stocks or other assets, give you access to low-cost, diversified investing portfolios.
Also Read: Why is Personal Finance Important?
5. Set, Monitor and Adjust Your Plan
Free budgeting and financial planning apps can help you save money by keeping track of your spending and savings goals and pushing you to stick to a budget.
Most important, don’t forget about your savings goals and plans once you’ve made them. Check your account often to see how your savings are growing and to keep track of any changes in how much you spend. This kind of long-term planning can be helped along by a growing number of financial tools.
It’s also important to keep an eye on savings rates. As banks change their rates or open new accounts, you might want to move to a better deal if you can do so without being charged an account closure fee.
At any time, it’s important to make sure that your savings are working for you, but it’s especially important now, when money is tight and interest rates are going up.