How to grow your savings

Tweaking your spending habits and setting a savings target can help get you on the right path.

There’s no right or wrong answer here – the key is to just get started.

You may have a specific reason to save, like an upcoming wedding, holiday or a new addition to the family. Or a more general reason, like setting money aside for emergencies or to give yourself more options in the future. Whatever the reason, just make a plan and start putting money aside.

Explore: Why saving is important

If you’re saving for something specific, you may have a target in mind. For example, the average cost of a wedding in the UK (including the Channel Islands) is just over £20,000. You may not need this much, but getting quotes and doing a rough budget can give you an idea.

If you’re building an emergency fund, it’s best to have at least 3 months’ worth of living expenses to cover a financial shock – like losing your job, or getting an unexpected bill.

Look at your finances to see where you’re spending your money and where you could make changes. For example, could you reduce your food shop or cancel any subscriptions you don’t regularly use? Saving £10 a week adds up to £520 a year.

You don’t need to stop the things you enjoy like dining out but remember to include them in your budget. This also helps avoid feelings of guilt if you spend money you hadn’t planned to.

If you have any outstanding debts, you may want to look at paying them off first.

Start with the ones with the highest interest rates, like credit cards and overdrafts. The interest rate you pay is likely to be more than you’ll earn from saving.

So, aim to pay off as much as you can afford to each month. Then, once you’ve cleared the debt, you can start focusing on saving.

Some longer term debts, like a mortgage, won’t need to be paid off right away. But if you can, you may want to look at making overpayments on your mortgage, which could reduce the amount of interest you pay. It’s important to check with your lender how much extra you can pay off your mortgage to avoid any potential early repayment charge (ERC).

A savings account gives you somewhere to keep your money, and potentially earn interest on it. You can then earn interest on that interest, helping to build your savings quicker. This is known as compound interest.

Finding the right type of savings account is key. If you don’t need to access the money right away, you may want to look at a fixed rate saver to maximise the interest you could earn. If you need flexibility, you may want to look at a savings account that lets you access your money whenever you need it.

Keep your emergency fund in a separate account to your other savings so you don’t accidentally use it to pay for non-emergencies – like a holiday, for example.

Whether it’s for an event or peace of mind, setting a savings goal can help you stay focused. Try writing your goal down and putting it on the fridge or create a note on your phone – this can help it stay visible.

Once you know what you’re saving for, decide how much you need and when you need it. Set a realistic timeline of when you can reach the target.

Prioritising saving can help you stay on track. Move the money you want to save into your savings account when you get paid, if you can – but make sure there’s still enough left in your account for your bills and rent.

If you want to save the same amount each month, set up a standing order so the money moves automatically. For example, with our Regular Saver, you can set up a standing order from your HSBC current account. The money will be locked away for a set period of time, at a fixed interest rate, so you’re not tempted to spend it.

You can only hold one Regular Saver Account at a time.

Compound interest is interest earned on previously earned interest.

For example, if you added £1,000 to a savings account with an interest rate of 2.5% AER/gross per annum, you’d have earned £25 in interest after the first year.

In the second year, even if the interest rate stayed the same, the amount you’d earn in interest would increase. This is because you’d earn interest on £1,025 – the £1,000 you added to your account plus the £25 you earned in interest in the first year. This is compound interest, so the longer you leave your money, the more it will grow.

Making regular contributions to your savings account adds to the benefits of compound interest, as the principal amount you’re earning interest on continues to increase.

A savings account gives you somewhere secure to keep your money.

HSBC, along with other banks in the Channel Islands and Isle of Man participate in depositor compensation schemes, which offer protection for eligible deposits, up to set limits.

Investing is where you put your money into something you think will grow in value over time. It has the potential to outperform the interest rate on a savings account, giving you the possibility of greater returns. But there are no guarantees.

The value of your investments can go down as well as up and you may not get back what you invest. It’s important to consider the risks and whether investing is right for you.

If you’re new to investing or you’re a seasoned pro, you should aim to invest for 5 years or more. A longer time frame gives your investments time to recover if they fall in value.

Use our Grow Your Wealth Calculator to check what you’d need to invest to reach your goals.

Explore: Saving and investing

AER stands for annual equivalent rate. This shows how much interest you’ll earn if you keep your savings in the account for a full year. All banks and building societies show their interest rate as AER, which can help make it easier when comparing savings accounts. 

Gross is the rate of interest paid before any tax (where applicable) has been deducted.