No savings? This is how to save when you’re starting from scratch

Falling coins on a happy piggy bank — Money really does buy happiness – even small amounts (Credits: Getty Images)

It’s official – saving money is good for your health.

A new study from Bristol University found that tucking it away in your savings account doesn’t only make you richer but it improves your sleep and mental wellbeing.

Even putting away a few pounds a week can make a positive difference, says the report by academics Jamie Evans and Sara Davies. Those on lower incomes are just as likely to report benefits, it adds.

Behavioural science expert Neil Bage says the results make sense because saving money helps to reduce the stress on our brains from financial anxiety.

‘The sheer act of saving can trigger a host of psychological and physiological benefits,’ says Neil, whose training business Shaping Wealth helps financial professionals improve wellbeing.

‘Money in general is an emotional lightning rod and can trigger all kinds of emotional responses, many of which are negative.

Three glass jars filled with penny coins, with small plant shoots growing out of them — You’ve got to start somewhere (Credits: Getty Images)

‘However, when people start saving – even small amounts – it can mitigate these effects. As this becomes habitual, stress levels around money start to decrease, leading to a greater sense of wellbeing and optimism.’

Starting small is just fine

More than a quarter of adults have less than £100 saved but the Bristol University study shows that those who do make an effort – however small – will improve their mood as well as their financial resilience.

It found that people on low incomes and of working age are the most likely to benefit.

‘Small amounts can ultimately lead to much bigger impacts,’ the report’s authors say. Neil agrees. ‘It’s about creating and maintaining good money habits. The smaller you start, the more likely you are to continue,’ he says.  

Short and long-term benefits

A woman looking thoughtful while holding a pink piggy bank — Think of it as a safety measure (Credits: Getty Images)

While the act of putting money into our savings accounts can trigger happy hormones, building those balances can improve our long-term resilience, too.

Savings provide a financial cushion that can protect us from unexpected costs such as a boiler breaking down, and this in turn can improve mental wellbeing.

Jeff Miller, vice-president at financial education group Nudge, reckons saving money is ‘like wearing a helmet while riding a bike’.

‘It’s peace of mind if a bump in the road comes… and financially there are always bumps in the road of life,’ he says.

Regular savers are also more likely to become homeowners. The Bristol study tracked a cohort of young adults from 2011 onwards and  found that 82 per cent of those  who regularly saved became homeowners, compared with just 15 per cent of those who didn’t.  

Not too late to start

Clock with pound coin sign in centre — It’s never too late (Credits: Getty Images/iStockphoto)

If you have never saved before, the good news is you will get a bigger happiness boost from opening a savings account than someone who has been putting away money for a long time.

The report found that new savings methods, including workplace schemes and those that set daily rather than monthly goals, can help new savers set up good habits, too.

ten ways to boost your savings (and wellbeing) 

1. Pick a regular saver 

Many banks will reward you for tucking money away every month by offering you a better rate of interest on a ‘regular saver’ account.

Some of the most competitive are available only to those who have a current account with the same provider, but it is relatively easy to switch your current account – and it could give you an extra cash bonus as well.

For example, First Direct is currently offering new customers £175 to switch their main bank account. Once this account is opened, you will have access  to a regular saver account at  seven per cent interest that is fixed for 12 months.

2. Automate it 

Saving pots labelled food, pension, and holiday — You won’t even have to think about it (Credits: Getty Images)

If you always forget to put money away in your savings account, you can rely on technology to do it instead.

Apps such as Chip and Plum use a technology called Open Banking to move money from your current account to a linked savings account – and calculate how much you can afford to put away.

3. Get government help

If you are on a low income or saving to buy your first home, you could be eligible for government money to bump up your balance. If you receive certain benefits including the working tax credit, you could be eligible for an account that gives you 50p for every pound you  save. Help to Save is an account  for the long term, with payment boosts at the second and fourth year of saving. You can apply at gov.uk/get-help-savings-low-income.

Everyone who has not yet bought  a first home can benefit from a Lifetime Isa, where the government will add a 25 per cent bonus – up to £1,000 a year – to your savings, and the money can grow tax-free.

4. Get your bank to help

Most banks have tools to help you to save, which may include the ability to divide your money into different pots for specific goals, or to round up every payment you make to the nearest pound and put the difference into a savings account.

5. Save your cashback

If you’re a parent, you will know that putting money away for your child’s future is a powerful way to feel good about yourself. Cashback site KidStart allows you to save your children money whenever you shop online, with cashback from retailers such as Sainsbury’s and H&M going straight into your child’s Junior Isa.

6. Pick a prize draw

Savers are often motivated by the chance of a larger cash prize, which may explain the enduring popularity of government premium bonds, which give you a chance to win every month – whether you have  £25 or £50,000 in your account.

Other banks also have prize  draw accounts, with Halifax giving away £100,000, £1,000 or £100  each month.

7. Try a TikTok challenge

£20 notes in a white envelope, next to an image of envelopes labelled with numbers — £5000 is no small sum (Picture: Facebook; iStock/Getty)

Social media has popularised money-saving challenges in recent months, and some say they inspire them to save.

One is the ever-popular Envelope Challenge, where savers put away a different amount of money between £1 and £100 into an envelope every day until they have £5,050 saved after 100 days.

8. Fix now for higher rates

If you already have a savings balance and want to make the most of it, now is the time to find a good, fixed rate before the Bank of England cuts interest rates, experts say. At present the best one-year bond pays 5.25 per cent.

9. Sell for savings

Decluttering your house to build  a savings balance could be a good summer challenge.

Sites such as eBay and Vinted make it easy to sell outgrown clothes and other items. Instead of keeping the money in your Vinted balance, move it into a savings account.

The average seller makes £246 a year, which is a good start for a savings balance.

10. Don’t forget the fun money

Cheerful mum shopping at street market with her daughter while exploring in a town during vacation — Don’t deprive yourself or you could binge-spend (Credits: Getty Images)

Depriving yourself to build up your savings account can be counterproductive, leading to binge-spending or dissatisfaction with your saving plan.

Make sure you build in some contingency each month so that you can have fun without feeling deprived because all your money is going into savings. Banks such as Monzo allow you to do this by creating separate budgeting pots, but you can also do it with a simple spreadsheet or an easy-access account that you transfer the ‘fun money’ into.