Financial resolutions 2022 – 3 tips to help with your savings

It’s common to want to reshuffle your savings in a way that makes it look like you’re making leaps and bounds. But while doing so, you might fall before you even reach the first obstacle.

Setting smaller goals that don’t seem as restrictive can give you better balance and a better chance of achieving them in the future.

Here are three tips that could help you save.

Although this article may give you useful advice, it is not personal advice. If you’re not sure if something is right for you, seek financial advice. Unlike the security offered by cash, all investments can fall or rise in value, so you cannot get back what you invest.

Create a savings plan for 2022

Whether you want to save up for a big event or are just starting to think about saving more for the future, there’s one rule everyone should follow to make their resolution work.

Make a plan.

It sounds simple, but it’s surprising how many people get it wrong.

Your plan is personal to you and doesn’t need to be complicated. It also does not need to be repaired.

Situations and circumstances can change, so don’t feel like you’ve failed if you’ve had to rethink things along the way.

We believe there are three golden rules for saving: cash for rainy days, medium to long-term plans, and save before you spend.

Save for a rainy day

Everyone should have a rainy day fund. It’s crucial for costs you don’t see coming, like a flat tire, extra bill, phone repairs or boiler failure. It’s the small costs that can really start to add up. So it’s best to make sure you’re prepared for them.

We generally suggest having between three and six months of essential expenses in an instant access account if you are earning an income and one to three years if you are not.

Getting started now could save you a lot of hassle.

Save before you spend

If you catch yourself saying that you’ll “save after you spend” for the month, you could find yourself losing your money faster than you think.

It can be useful to have a pot for fun. You can set aside an amount of your choice that you know is there for you.

By saving everything left over after your essential expenses, you are almost setting yourself up for failure. Two months is generally not equal for most people. You could cut back one month or splurge the next.

But by giving yourself your own pot of gold, you might find yourself saving even more at the end of the month.

Medium and long term future savings

When it comes to your medium-term savings, finding what’s right for you depends on a few different factors. The first is how long you want to save, the second is how much you want to save.

If you plan to use your savings over the next five years, you should not invest them and they should remain in cash.

If you are looking to increase your cash returns, the active savings service could help. Choose from a range of easy-to-access, time-limited products, all under one easy-to-use, hassle-free online service.

We also offer a Cash ISA if you are looking to protect your cash savings from UK income tax. The tax rules for ISAs can change and their benefits depend on your personal circumstances.

Discover the HL Cash ISA

If you won’t need your savings for at least five years, you might consider investing them.

Investing involves allocating your money to different areas that are not cash. It can help you grow your money in the long run. But unlike the security offered by cash, investments can go down as well as up in value, so you could get back less than you invest.

A tax-efficient account like a Stocks and Shares ISA might be a good place for your investments. This way you can save up to £20,000 for the 2021/22 tax year, free of income and capital gains tax.

START INVESTING

It’s also important to make sure you’re doing everything you can now for the future.

If you can afford it, you might consider maximizing your occupational or personal retirement contributions to whatever works best for you. You may find that your employer matches your contributions if you increase your pension, but you can find out more from them. Because pensions are designed to support you when you are not earning income, you will generally not be able to access your pension until age 55 (it will rise to age 57 in 2028).

If you want to make your savings grow longer in the long term, you can also build up a personal pension alongside a professional pension if you have one. One type of personal pension is a self-invested personal pension (RSPP). Like an ISA, everything in a SIPP is sheltered from income and capital gains tax. You can get up to 45% tax relief on what you contribute to a SIPP (46% for Scottish taxpayers) and you can contribute up to £40,000 a year.

LEARN MORE ABOUT AN SIPP

You may also consider looking into other long-term products like a Lifetime ISA (LISA) if you are under 40. LISAs can be used to save alongside your pension, or you can access your savings before you turn 60 if you’re using it to buy your first home. There are restrictions on LISAs and other withdrawals that usually mean a 25% government fee is applied so you can get back less than you invested. It is important to consider your needs and deadlines.

For some people, it might be more tax-efficient to consider saving in a LISA rather than a pension.

Remember, however, that tax rules may change and the benefits depend on your personal circumstances.

But keep in mind that if you save in a LISA instead of a pension, you could miss employer contributions. Your right to certain means-tested state benefits could also be affected.

If you are unsure whether a course of action is right for you, you should seek advice.

LISA VS PENSION FACT SHEET

DISCOVER LISA

LEARN MORE ABOUT PENSIONS

New Year’s raffle – earn what you pay

If you contribute to an HL SIPP and/or HL LISA, you could win up to £3,000. The total of new payments made of £100 or more between December 1, 2021 and February 23, 2022 will count towards your potential cash prize. There will be 7 winners of a maximum of £3,000 each.

FULL TERMS APPLY

Discover the HL SIPP

Discover the HL LISA

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Financially Fearless is centered around women, but our content aims to represent anyone who faces gender bias and those who are underrepresented. We always welcome and encourage our allies to support our initiative and also join the conversation.

The active savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorized and regulated by the Financial Conduct Authority (company reference number 915119). Hargreaves Lansdown Savings Limited is authorized by the Financial Conduct Authority under the Electronic Money Regulations 2011 with company reference 901007 to issue electronic money.

Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).

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