International women’s day – spotlight on cash savings

Cash savings are the first port of call for anyone building for the future. So this International Women’s Day seems like a good place to start.

However, I’m not going to tell you how to build money in a savings account. Chances are, you already know what you’re doing here. A couple of years ago, when we asked people who took charge of the day-to-day finances in their relationship*, 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 likely one reason why we’re more likely to open a Cash ISA than men.

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

Although this article can give you helpful tips, it isn’t personal advice. If you’re not sure whether something is right for you, ask for financial advice. They can help you understand what’s right for your personal circumstances.

*HL Opinium Survey, April 2020, 1461 respondents.

When’s the best time to save?

If you’ve got debts to pay, you’re worried about a pension shortfall, and your cash savings need some attention, it can be difficult to know where to start, and where savings fit.

Our 5 to Thrive is a great place to start. It outlines what we believe are the pillars to financial resilience.

Your first priority is to pay down expensive short-term debts, like credit cards. These debts cost you far more in interest than you’ll ever make on cash savings. Next, look at protecting your family. This can include making a will and considering life insurance if you have people who depend on you.

Once those are in place, you should have two goals running side-by-side, building cash savings, and paying into your pension.

The fifth pillar – when you’ve got everything else in place – is investing. Though unlike the security offered by cash, the value of investments will rise and fall, so you could get back less than you put in.

Find out more about 5 to thrive

What am I saving for?

A few years ago, we asked people why they were putting money into a savings account. The most common answer, by far, 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 pot is there to cover essential expenses when life happens. You’ll often need it quickly, so you should always keep this money in an easy access savings account. The exact size of that pot depends on lot of things. But as a guide, when you’re working, we think aiming for three to six months of essential expenses is sensible. This increases to one to three years’ worth of expenses if you’re not working.

You’d be forgiven for wanting an exact figure to work towards. But the fact we’re all so different, and we’re all in different positions financially, means there’s not one figure that works for everyone. The word ‘essential’ also means different things to different people. So where do you start?

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

How long you’ll need to cover those expenses will depend on all sorts of things, from how secure your job is to how your health is.

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 at the moment, the key is not to feel it’s too far away to be worth bothering with. You don’t need to get there tomorrow – achieving success isn’t just about hitting a goal, it’s about putting away whatever you can afford to save, when you can afford to do it, and knowing you’re doing the right thing.

You might have enough cash savings already. In which case, you can focus on other savings goals or prioritise your other finances – like pensions. Later this month, we’ll take a closer look at pensions, and closing the pensions gap.

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