International Women’s Day – spotlight on cash savings

Cash savings is the first port of call for anyone building for the future. This International Women’s Day therefore seems to be a good starting point.

However, I’m not going to tell you how to accumulate money in a savings account. Chances are you already know what you’re doing here. A few years ago, when we asked people who looked after their couple’s day-to-day finances*, women were more likely to say they were in control than men.

Women have the power to set the family budget and put money aside. This is probably one of the reasons why we are more likely to open a Cash ISA than men.

So I’m not going to teach you how to suck eggs and go over the basics of how to save. Instead, let’s focus on the “when” and the “what.”

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. They can help you figure out what is right for your personal situation.

*HL Opinium survey, April 2020, 1461 respondents.

When is the best time to save?

If you have debts to pay, worry about a pension shortfall, and your cash savings need attention, it can be difficult to know where to start and where the savings lie.

Our 5 to Thrive is a great starting point. It describes what we believe to be the pillars of financial resilience.

Your first priority is paying off expensive short-term debt, like credit cards. These debts are costing you far more in interest than you will ever earn on cash savings. Next, think about protecting your family. This may include writing a will and considering life insurance if you have dependents.

With these in place, you should have two goals side by side, building up cash savings and contributing to your pension.

The fifth pillar – when everything else is in place – is investment. Although unlike the security offered by cash, the value of investments will rise and fall, so you may get back less than you invested.

Learn more about 5 to thrive

Why am I saving?

A few years ago we asked people why they put money in a savings account. By far the most common response was that they were saving for a rainy day – given by one in three women. But how big should your rainy day fund be?

First, your emergency kitty is there to cover essential expenses when life comes around. You’ll often need it quickly, so always keep this money in an easy-to-access savings account. The exact size of this pot depends on many things. But as a guide, when you’re working, we think it’s reasonable to aim for three to six months of essential expenses. This increases to one to three years of expenses if you are not working.

You’d be forgiven for wanting an exact number to hit. But the fact that we’re all so different, and we’re all in different financial positions, means there’s no one number that works for everyone. The word “essential” also means different things to different people. So where to start ?

List what you couldn’t do without if you had to go through a few difficult months. Then go through your bank statement or banking app to add up what they cost.

How much time you need to cover these expenses will depend on everything from your job security to your health.

Learn more about saving for a rainy day

Once you know your target, you can see how you’re doing. If you need more than you’ve put aside for now, the key isn’t to feel like it’s too far to be worth worrying about. You don’t have to get there tomorrow – achieving success isn’t just about reaching a goal, it’s about setting aside whatever you can afford to save, when you can afford it and to know that you are doing the right thing.

You may already have enough cash savings. In this case, you can focus on other savings goals or prioritize your other finances, such as pensions. Later this month, we’ll take a closer look at pensions and close the pension gap.

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