7 important things to save money for

Being prepared for scheduled and unexpected expenses is one hugely important way we can all avoid a lot of stress.

I haven’t historically been the best of savers. I always religiously paid money into my pension when working full-time in journalism, but never put regular money away for other things.

As a result annual expenses and emergency expenses would pop up that I was just not prepared for.

Getting into the habit of saving regularly, not just for things like a house deposit, is one of the best ways you can prevent yourself from getting weighed down by money woes.

There are a lot of expenses that you can predict in advance, and give yourself several months to prepare for so that when that bill lands on your front door, you can pay it without going into the red.

Here are 7 very important things you should be saving money for.

Annual household expenses

There are certain renewal bills that come every single year. Try to keep track of when they are due by making a note of the month you took out the policy or service.

Although you can pay pretty much all of these type of expenses in monthly instalments, you will generally save money if you pay it off in a lump sum.

These are the annual expenses to keep track of:

Car insurance
Home insurance
Car tax
Pet insurance
Car recovery service
Central heating servicing and breakdown cover

Christmas and birthdays

This one used to sneak up on me every November! I always get carried away at birthdays and Christmas because I just love treating people.

But I hate feeling broke in January. So to avoid falling into the New Year debt trap, put aside money for gifts every month.

Write down all of the birthdays you will need to budget for in the year, as well as when they are. Also make a note of the people you will buy Christmas presents for.

Write out what you can afford to spend on each person. If money is tight, have a chat with the adults in your family and see if maybe everyone would prefer to just give gifts to the children this year.

We did that in our family last year and it took the pressure off so much. It really made a huge difference to my spending.

Alternatively have a think about cutting back on how much you spend on each person and consider whether you can make personalised gifts.

One year for Christmas I made chutney myself for everyone in the family.

Retirement

If your company has a pension scheme then make sure you are paying into it. Try to pay in the absolute maximum amount you can afford to every month.

You will be so glad you built this pot up as much as you can!

If you are self-employed then get yourself a pension set up and start paying into it regularly.

After I was made redundant I stalled on setting up a new pension for 18 months, which is a lot of lost contributions.

Now I have Nest pension which is extremely simple to set up and I pay a set amount in every month. I can choose to top this amount up or increase it whenever I like.

Clothes

If you have children this is particularly important as school uniform costs will swing by every July.

Try to budget for each member of the family and have a little money set aside for the new shoes and new season clothes you will all need as the year goes on.

One of the best money-saving tips I’ve ever received about clothes is to avoid the fast fashion type purchases.

So much of advertising surrounding fashion now is about the new “it” dress. All this does is encourage you to buy brand new items every month that you will be tired of by next year.

Buy things that you are completely sure you will love in six months’ time. Also think practically about where you can wear items. If they are dry clean only, will they just be a pain to wear around children who are likely to put their sticky fingers on it?

As a general rule, I like to pause and wait one week before making any purchase. This gives me space to really think about whether I actually need it or not.

Emergencies

Everyone needs a rainy day fund.

Things can go wrong in the blink of an eye, whether it be a car repair issue or a leaking roof.

Try to have enough in your emergency fund to tide you over for three months in case you were to lose your regular income.

This amount may feel like a struggle to build up, but you will be so grateful to have that safety net if the worst ever happens.

Your tax bill

If you are self-employed then you need to start saving for this from day one of the new financial year.

It’s one of those things that can sneak up on you come tax filing day. As a general rule I recommend putting aside 20 per cent of your earnings.

However, the amount you will need to pay off your tax bill is very dependent on how much you earn. If you earn less than £12,000 a year then you won’t need to pay any tax at all.

If you earn £13,000 a year then your tax bill will be around 10 per cent of your earnings.

Try to bank on the worst case scenario for your tax bill, and get in the habit of putting that money aside.

As a freelancer this has been one of the biggest challenges I have faced. It’s easy to just take the money you’re paid and spend it as if it’s all yours.

The best thing I ever did as a freelancer was to start tracking my income and outgoings regularly, and thinking about what my costs would be at the end of the year when my tax bill came.

There are tips on how to figure out how much you need to pay in tax if you self assess over on the government website.

Your children’s future

Your kids cost you a whole lot of money already, but they are only going to need more support as they grow older and the expenses increase.

Areas your kids may want financial support with include:

Learning to drive and buying a car.
University.
Buying their first home.
Getting married.

Whether you want to save for all of these things or split them between different savings accounts, I suggest you get started from the second you find out you are pregnant. It’s never too early to start.

Be sure that you properly investigate the options for saving for your child. For example a Junior ISA is great due to the money being free from being taxed, but your child will get access to that money from 18. You will have no control over how they spend it.

Do you trust them to not spend it on a big holiday to Ibiza with their pals?

It’s well worth stepping back and thinking about how you would prefer to handle their savings, and how you eventually want to give it to them when they are adults.

Final thoughts on things you need to save money for

There you have it, these are the things you need to be saving for.

It can seem daunting when you look at this list, but remember that it’s never too late to start saving.

Think about where you can put the money so it gets the best rate of interest you can possibly get, although this is generally not going to be great in current times!

Make regular payments, that you set as a direct debit so that it’s a habit you form every single month.

For money-saving tips, you can check out this post with 50 ideas for SAHMs to save money.

And if you want to make extra cash, check out this post about starting a blog.