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Financial resolutions 2022 – 3 tips to help with your savings

We offer 3 tips to help with your savings 2022.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

It’s common to want to overhaul your savings in a way that feels as though you’re making big leaps and bounds. But in doing so, you could end up falling before you even get to the first hurdle.

Setting smaller goals, that don’t feel as restrictive, can give you a better balance and a better chance of achieving them in the future.

Here are three tips that could help you with your savings.

Although this article can give you helpful tips, it’s not personal advice. If you’re not sure if something is right for you, ask for financial advice. Unlike the security offered by cash all investments can fall as well as rise in value so you may not get back what you invest.

Create a savings plan for 2022

Whether you’re wanting to save for a big event or starting to think about putting more away for the future, there’s one rule everyone should follow to make their resolution work.

Make a plan.

It sounds simple, but it’s surprising how many people get it wrong.

Your plan is personal to you and doesn’t have to be complicated. It also doesn’t need to be fixed.

Situations and circumstances can change, so don’t feel as though you’ve failed if you’ve had to rethink things along the way.

We think there are three golden rules to saving – rainy day cash, medium to long-term plans and save before you spend.

Saving for a rainy day

Everyone should have a rainy-day fund. It’s crucial for the costs you don’t see coming, like a flat tyre, an extra bill, phone repairs, or a boiler breakdown. These are the little costs that can really start to creep up. So, it’s better to make sure you’re prepared for them.

We usually suggest having between three to six months’ worth of essential expenditure in an instant access account if you’re earning an income and one to three years if you’re not.

Starting now could save you a lot of hassle.

Save before you spend

If you find yourself saying you’ll ‘save after you spend’ for the month, you might find yourself chipping away at your money quicker than you think.

It can help to have a pot for ‘fun’. You could put an amount of your choice aside that you know is there for you to spend.

By saving everything that’s left after your essential spending, you’re almost setting yourself up for failure. No two months are generally equal for most people. You might cut back one month or splurge a bit the next.

But by giving yourself your own pot of gold, you could find yourself saving even more at the end of the month.

Medium to long-term future savings

When it comes to your medium-term savings, finding what works for you depends on a few different factors. The first is how long you want to save for, the second is how much you want to save.

If you’re planning on using your savings within the next five years, you shouldn’t be investing it and it should stay as cash.

If you’re looking to boost your cash returns, the Active Savings service could help. Choose from a range of easy access and fixed term products, all under one easy to use hassle free online service.

We also offer a Cash ISA if you're looking to shelter your cash savings from UK income tax. Tax rules for ISAs can change and their benefits depend on your personal circumstances.

Find out about the HL Cash ISA

If you won’t need your savings for at least five years, you could consider investing it.

Investing involves spreading your money across different areas which aren’t cash. It can help you to grow your money over the long term. But unlike the security offered by cash, investments can fall as well as rise in value, so you could get back less than you invest.

A tax-efficient account like a Stocks and Shares ISA could be a good place for your investments. That way you can save up to £20,000 for the 2021/22 tax year, free from income and capital gains tax.

GET STARTED WITH INVESTING

Making sure you’re doing as much as you can now for the future is also important.

If you can afford to, you could consider maximising your workplace or personal pension contributions to what’s comfortable for you. You might find your employer matches your contributions if you add more to your pension – but you can find out more from them. Because pensions are designed to support you when you’re not earning an income, you usually won’t be able to access your pension until age 55 (rising to 57 in 2028).

If you want to grow your long-term savings further, you could also build up a personal pension alongside a workplace pension if you have one. One type of personal pension is a Self-Invested Personal Pension (SIPP). Like an ISA, anything in a SIPP is sheltered from income and capital gains tax. You can get up to 45% tax relief on what you contribute to a SIPP (46% for Scottish taxpayers) and you can pay in up to £40,000 a year.

FIND OUT MORE ABOUT A SIPP

You could also think about looking into other long-term products like a Lifetime ISA (LISA) if you’re below 40. LISAs can be used for saving alongside your pension, or you can access your savings before you’re 60 if you’re using it to buy your first home. There are restrictions on LISAs and other withdrawals usually mean a 25% government charge is applied so you could get back less than you put in. It’s important to consider what your needs are and your timeframes.

For some people, it might be more tax-efficient to consider saving into a LISA than a pension.

Remember though, tax rules can change, and benefits depend on personal circumstances.

But keep in mind, if you save into a LISA instead of a pension, you could miss out on employer contributions. Your entitlement to certain means-tested state benefits could also be affected.

If you’re not sure whether a course of action is right for you, you should seek advice.

LISA VS PENSION FACTSHEET

DISCOVER LISA

DISCOVER MORE ABOUT PENSIONS

New Year's cash prize draw - win what you pay in

If you pay into an HL SIPP and/or HL LISA, you could win back up to £3,000. Total new payments made of £100 or more between 1 December 2021 and 23 February 2022 will count towards your potential cash prize. There will be 7 winners of up to £3,000 each.

FULL TERMS APPLY

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Financially Fearless is centred around women, but our content aims to represent anyone facing gender-biases, and those who are underrepresented. We always welcome and encourage allies to support our initiative and join the conversation too.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.

Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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