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Key takeaways
- Give your savings a purpose and a monthly target
- Automate the saving on payday, and increase it when your income rises
- Clear expensive debt before saving large amounts, while keeping a small emergency buffer
- Compare accounts on rate, access and FSCS protection, and use your tax-free allowances
- Be wary of promises of high returns with no risk
Saving money regularly is less about willpower than about setting things up so that saving happens automatically. This guide explains how to decide how much to save, how to find the money, where to keep it, and how the main UK savings rules work, so that you can build the habit and keep it going.
Start with a goal
Saving is easier when the money has a job. Write down what you are saving for, how much you need and when you need it.
- Emergency fund: usually the first goal. See our guide to building an emergency fund.
- Short-term goals: a holiday, a car repair, a wedding or a big purchase within a few years.
- Medium-term goals: a house deposit or a career break.
- Long-term goals: retirement, which is normally best handled through a pension.
Divide the target by the number of months you have to reach it. A £1,200 holiday fund in 12 months means £100 a month. Seeing the monthly figure turns a vague wish into a plan.
Work out what you can afford
Use your budget to find your real surplus. If you do not have one, our guide to making a budget walks you through it, and the free budget planner does the sums. Include irregular costs divided by 12, so that you are not planning to save money you will actually need for car insurance or Christmas.
If there is nothing left over, look at the biggest costs first. Reviewing your energy, broadband and insurance often finds £30 to £100 a month; see how to cut household bills.
If you have high-interest debt, paying it off usually beats saving, because the interest you pay on a credit card is normally much higher than the interest you earn on savings. A common order of priorities is: a small starter emergency fund, then clear expensive debt, then build the emergency fund to three to six months of essential costs, then save for other goals. See how to pay off debt faster.
Make saving automatic
Willpower runs out; standing orders do not.
- Pay yourself first. Set up a standing order for the day after payday so the money leaves before you can spend it.
- Use separate pots. Many banks offer pots or additional accounts, so you can label money for different goals.
- Start small. Even £20 a month builds the habit. Increase the amount whenever your income rises.
- Round up. Some banking apps round card purchases up to the next pound and move the difference to savings.
- Direct windfalls. Put a share of bonuses, tax refunds and gifts straight into savings.
Where to keep your savings
The right home depends on how soon you need the money.
Compare accounts by their interest rate (AER), access rules, any bonus rate that ends after a period, and whether the provider is covered by the Financial Services Compensation Scheme (FSCS). Do not leave money in an account that has dropped to a low rate when better rates are available.
| Need the money | Options to consider |
|---|---|
| Any time | Easy-access savings account, cash ISA |
| In a set number of months or years | Fixed-rate savings account, fixed-rate cash ISA |
| Years away | Stocks and shares ISA or pension, which carry the risk of falling in value |
| Prize bonds and similar | Check the terms carefully, because returns are not guaranteed |
Understand the tax rules
Some tax rules affect how much of your interest you keep. The rules and limits are set by the government and can change, so check GOV.UK for the current figures.
- Personal Savings Allowance: most basic-rate taxpayers can earn some interest each year without paying tax on it, and the allowance is lower for higher-rate taxpayers.
- Starting rate for savings: people with lower earnings may be able to earn more interest tax free.
- ISAs: interest and gains inside an ISA are tax free, up to the annual ISA allowance. See our guide to ISAs.
If you are likely to exceed your allowances, an ISA can protect the interest from tax.
Inflation and interest
Interest on savings matters most when compared with inflation, which is the rate at which prices rise. If your account pays 3% and inflation is 4%, your money buys slightly less each year even though the balance grows. This is a reason to shop around for good rates, and to consider longer-term options such as pensions and investments for money you will not need for many years. Investments can fall as well as rise, so only invest money you can afford to leave alone. Our savings growth calculator shows how regular saving can build over time, with an option to adjust for inflation.
Staying motivated
- Track progress. Watching a balance rise is rewarding. Many people use a simple spreadsheet or a banking app.
- Reward milestones. A small treat when you hit a target keeps things sustainable.
- Review every few months. Check your standing order amount and your interest rate.
- Plan for setbacks. If you have to dip into savings, rebuild as soon as you can rather than giving up.
Be careful with get-rich-quick schemes
If a scheme promises high guaranteed returns with little or no risk, treat it as a warning sign. The Financial Conduct Authority (FCA) runs the ScamSmart campaign and a warning list of unauthorised firms. Check any firm on the FCA Register before handing over money.
Saving as a couple or household
If you share finances, agree on shared goals as well as individual ones. Some couples pay a fixed amount into a joint account for bills and savings, and keep the rest separate. Others pool everything. Whichever approach you choose, talk openly about targets so that one person is not saving while the other is borrowing. Review the arrangement whenever circumstances change, such as a new baby or a change of job.
Frequently asked questions
How much should I save each month?
Is it better to save or pay off debt?
Is my money safe in a savings account?
Should I choose a fixed or easy-access account?
Sources and further reading
- Savings: the basics — MoneyHelper
- Tax on savings interest — GOV.UK
- What's covered by the FSCS — Financial Services Compensation Scheme
- Individual Savings Accounts — GOV.UK
- ScamSmart — Financial Conduct Authority
This page provides general information only. It is not personalised financial, legal or tax advice, and rules and figures can change. Your situation is unique — please check official sources such as GOV.UK and MoneyHelper, and speak to a qualified, FCA-authorised adviser before making important decisions about your money.
Written by
MoneyBrink Editorial Team — Editorial team
The MoneyBrink Editorial Team researches, writes and reviews every guide on this site. We work from official UK sources such as GOV.UK, the Financial Conduct Authority, MoneyHelper and the Money and Pensions Service, explain things in plain English, and update articles when the rules change. We do not sell financial products and we do not give personal advice.
Read how we research and check our guides in our editorial policy.
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