She recommends that everyone have a pot of emergency savings to cover unexpected bills like a new washing machine, dentist bill, or the car breaking down. Saving up this pot of money should be a priority.
Once you’ve got that pot established, you can save for short-term things such as buying that new phone, Christmas, or going on holiday. Then, a third pot of savings should be for medium-term goals, including home renovations, a wedding or buying a new car.
And finally, long-term savings are about making sure you’re financially stable in the future, and could be saving for your pension and making investments.
Beattie recommends putting a minimum of 10 per cent of your earnings into savings. This is a doable goal that will still help you build up those pots.
What are money saving apps and how do they work?
Money savings apps work in different ways, but the main ones are apps that save by rounding up on purchases, and those that automatically put aside a percentage of your income.
“What these apps do is they fulfill a need to make savings as simple as possible, because it takes away all the hassle, and all the thought process behind saving,” said Beattie.
Apps such as Plum and Chip analyse your spending and transactions to work out the best amount to put away every week. By linking with your bank account, it is able to take that amount of money out each month and put it in a separate pot, which you can withdraw from any time.
You can decide whether you want the app to save a higher or lower percentage, and can ask it to stop saving at any time.
The Big Exchange
Make your money count for more and download the free app from the Apple Store or Google Play.
Another type of savings app, such as Moneybox, will round up your purchases to the nearest pound and sets aside the spare change. That money is then invested, and the app takes 0.45 per cent fee of the value of your investments per year as a fee for using the service.
One of the more simple types of money saving apps is Squirrel, which essentially deposits a spending allowance into your current account. Once you enter your salary and bank details, the app sets up a bank account that keeps your rent or bills money separate so you can’t accidentally dip into them, and deposits your spending money funds into your account weekly or monthly.
Beattie does warn there are extra risks associated when you start introducing additional apps and platforms into your method of saving.
When choosing a savings app, Beattie says the most important thing is to check that it has been approved by the Financial Conduct Authority (FCA). The FCA regulates the financial services industry in the UK, and can pay back up to £85,000 per person per account if something goes wrong such as loss or theft.
This is also why, says Beattie, that you should never have more than £85,000 in any one savings account.
While not specifically a money saving app, The Big Exchange app brings together all your balances and recent transactions instantly without the need to log into separate sites. It gives a complete picture of your personal financial world so that you can set spending budgets and savings goals, and plan more easily by seeing how potential changes to your income or outgoings would affect your cash flow.
Are money saving apps better than a traditional savings account?
While Moneybox could be a good introduction to investing for those who want to dip their toes in the water – “it’s a really simple way to get used to investing and watching the ups and downs of the stock market,” Beattie warned that, “the fees are high when you’re only putting in a little bit each money.”
For those who do not receive a steady income – such as Freelancers or those who are self-employed – a savings app could help do the maths and figure out what amount you should be saving each month as your income fluctuates.
But ultimately, “the best way to save is to set up a direct debit to a savings account,” said Beattie.
This is because traditional savings accounts with big banks often give better interest rates than these apps, so if you can stick to it, you’ll save more in the long run.
If you have a reliable income, this is the most simple and reliable way to build up your savings. You may need to tweak the amount of money you save each month to find the sweet spot, but if you receive a salary, Beattie believes this is the easiest way to budget.