5 failsafe ways to save cash in a time of rising costs

11 September 2024

In the UK, the cost of living crisis is still happening.

Since inflation reached its peak of 11.1% nearly two years ago (October 2022), it has now slowed to just over 2%. But many forget that the effects of double digit-inflation are still being felt by British consumers – the cost of goods and services has not “fallen” but is now simply rising more slowly.

What’s more, for high earners like you, there could be considerable increases to your expenditure on the horizon, along with the rising costs that have already had an effect on you in the last few years.

For example, the proposed VAT changes to private school fees might mean you pay more for your children’s education, and any tax increases announced in the upcoming Budget may have an impact on you too.

As such, you could find that despite earning plenty and being careful about spending, your savings have stagnated or are even being depleted.

So, keep reading to discover five failsafe ways to save more in a time of rising costs.

1. Save a small amount rather than nothing

If you’re a high earner with plenty of wealth, you might take an “all or nothing” approach to saving.

For instance, if you find yourself with £50 to spare, you may not consider this worth saving into your emergency fund or another cash saving pot. But £50 here and there can soon equal a significant sum – you only have to do this 20 times before you’ll see your savings rise by £1,000.

Doing away with your all-or-nothing mindset might help you save small amounts more often, especially if you are finding it challenging to save larger lump sums now that your regular costs are rising.

2. Increase your pension contributions

The beauty of pension contributions is that if you are employed, you can save for retirement without having to lift a finger. You’ll be automatically paying into your pension, along with any employer top-ups, every month, and receiving tax relief on these contributions too.

So, if you want to increase the amount you save for the future even in a time of rising costs, it could help to consider:

• Increasing your pension contributions through a salary sacrifice scheme if available. This may not have much impact on your take-home pay, but could boost the amount you and your employer invest into your pension each year.
• Claiming all the higher- and additional-rate tax relief you are entitled to through self-assessment each year, if you pay either rate of Income Tax on your earnings.

For those who are self-employed, setting up automatic payments into your personal pension could make you more likely to remain consistent than manually contributing.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Check on savings residing in low-interest accounts

According to research by AJ Bell, as of May 2024 there was a staggering £253 billion sitting in UK cash accounts that pay no interest.

The Bank of England (BoE) raised the base rate from 0.1% to 5.25% gradually between 2021 and 2023, and reduced it to 5% in July 2024. In line with these increases, most banks and building societies now offer upwards of 4% interest on a range of savings accounts.

So, check how much interest your cash savings are earning, and perhaps explore new options if you discover that you’re not benefiting from a competitive rate. This could make a huge difference to the growth of your savings over time.

For instance, if you paid £10,000 into an account earning 0.25% interest, in a year’s time this money would be worth just £10,025. However, an account paying 4% would top up your savings by £400.

Giving your cash savings, including your emergency fund, the chance to grow means you may meet your savings targets more easily.

3. Cancel unused subscriptions

Citizens’ Advice reports that UK consumers spend a total of £688 million a year on unused subscriptions. 40% of those surveyed for this research said they had experienced a subscription service automatically renewing without their knowledge, and 74% support a ban on automatic renewals.

However, with the current legislation allowing for subscription services to roll over and charge your bank account in the process, it may be wise to check on your active subscriptions annually.

You might find you’re paying for services you don’t use, and by cancelling them, you’ll be able to put the additional funds towards your future.

4. Pay your future self first

This is an age-old tip that so many high net worth individuals ignore – so let’s reiterate it.

It may be more effective to pay yourself (in other words, transfer money into a savings account, your pension, or another investment account like an ISA) as soon as you are paid, rather than waiting to see what you have left over at the end of the month.

The truth is, money finds a way to be spent, no matter how much you earn, so only saving your “leftovers” might leave you falling short of your goals.

Giving your future self a wealth boost will likely help you stick to your targets more easily – plus, it feels immensely satisfying to do so.

Get in touch

If you are facing rising costs in several aspects of your life, you could begin to feel overwhelmed.

Bespoke financial planning could help to put your mind at ease. Email info@depledgeswm.com or call 0161 8080200.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.