Savings calculator

Guide to saving money

If you’re new to saving, then it can be a daunting prospect, especially if you’re hoping to save up enough money to afford a deposit on a house. The amount of money needed can seem so huge that it’s difficult to know where to start.

We’ve put together some tips to help you get started with saving money, which you can use alongside our regular savings calculator to help you get started.

Setting up a budget

Before you use our savings estimator, it’s a good idea to put together a budget. That means that, as well as helping you to stay on top of your monthly expenses and day-to-day spending, you’ll easily be able to see how much money you can realistically set aside as savings.

To get started you’ll need to have details of all your expenses, so it’s worth spending some time looking through your bank statements to figure out how much you spend on fixed monthly costs. This can include things like:

• Your rent or mortgage
• Household bills
• Car finance, insurance and tax
• Subscriptions like Netflix, magazine subscriptions or the gym
• Financial products, like credit cards or loans
• Travel passes

You should also get an idea of how much you spend on variable expenses. That could include things like:

• Food and drink
• Clothing
• Toiletries
• Gifts
• Socialising
• Hobbies and entertainment

Then, you need to look at how much you have coming in from your salary or other income, how much you have going out, and see what’s left. You can use a spreadsheet to do this or there are lots of budget planners available online.

If you’re spending more than you have coming in, or if there’s not enough spare cash leftover to put into savings, then you might want to think about whether you can cut back.

Maybe you pay £100 a month for a gym membership but you haven’t been for ages? If you cancel your membership and saved the money, you won’t miss the cash and will have effortlessly saved £1,200 in a single year.

Or maybe you need to review your household bills instead. Although bills are undoubtedly getting more expensive, there may still be ways you can save, perhaps by changing to a cheaper mobile phone contract, or ensuring you’re on the right council tax rate.

Setting a savings goal

Let’s say you want to save £20,000 for a house deposit. It’s a lot of money, but you can use our savings goal calculator to work out how much you need to set aside each month, and how long it’ll take you to reach the goal amount.

It can seem less daunting if you break your goal up into chunks. So rather than thinking you need to save £20,000, you could break it down into four chunks of £5,000 - or even twenty chunks of £1,000.

You may find it easier to set up a standing order and transfer the money from your account every month on pay day - that way the money will be in your savings account before you even notice it’s gone.

Finally, make sure that your savings are working as hard as they can for you. There are lots of different places and types of account where you can save your money, depending on the amount you’re saving and your goals.

Saving to buy a house

If your goal is to buy a property, then our savings planner will help you to understand when this might be feasible for you, based on how much you can put aside every month.

Saving up your deposit, especially as a first time buyer, can be the hardest part of the whole process.

The bigger your deposit, the more likely you are to get a better mortgage deal and a lower interest rate, so it could be worth taking a little longer and saving as much as possible.

However, that’s not to say that you can’t get a good mortgage if you have a lower deposit. If you’re not sure what type of mortgage you might be eligible for, you can get started with our Online Mortgage Finder.

Most first time buyers put down between 5 to 10% of the property value as a deposit. Whilst having a deposit of 15% or more will give you a better mortgage deal, there are options for those with a deposit of 5% and there are also government schemes to support those who are eligible to buy a new home.

It’s a good idea to do your research on the cost of houses in the area you’re looking in and get an understanding of how much the type of properties you’re interested in are selling for. Speaking to local agents and looking at property websites is a good place to start.

Once you know how much you need to save for your deposit, it’ll be easier to make a plan to reach that goal. You can use our long term savings calculator to work out how much you need to save every month to get you to the deposit amount you need.

If you know you want to save £20,000 in three years, for example, then you’ll need to save around £556 per month.

Or if you want to save £10,000 and know that you’re able to set aside £200 a month, then our calculator will show that it’ll take you about four years and two months to reach your goal.