Money Advice Service

With household bills rising ever higher, managing a tight budget can be tough. What often throws us off course is the unexpected, but regular saving can help.

Step 1 – Identify your goal

Did you know?

Research shows that people who save are happier with life, as well as less likely to have financial problems. This is true, whether they save a little or a lot.

Source: ‘Financial capability and well-being’, FSA (2009)

It’s not easy juggling a tight budget, especially if you have children.

So it’s not surprising that we all dip into debt sometimes:

to pay for Christmas, when the washing machine breaks down, or the car bill comes to more than expected.

But borrowing makes whatever we buy even more expensive, while repaying credit cards and loans just adds to the strain on the budget.

And, have you noticed how emergencies crop up with surprising regularity – one thing after another?

It turns out that the one thing we can all expect is the unexpected.

So we might as well budget for it by putting aside some money each week or month to build up a pot to dip into when the unexpected comes around again.

Having an emergency fund, however small, takes the sting out of the unexpected.

Whether the fuel bill is more than you’d feared, the exhaust falls off the car, the kids need new shoes – the list is endless – you will have budgeted for it.

You’ll be able to sort it out without borrowing and with a lot less stress.

Step 2 – Work out how much to save each month

“We were spending on things that weren’t actually that important to us. Like buying coffees and snacks on the way to work and back. Seems trivial – two pounds here, three pounds there. Between us, we were spending £20 a week. That’s over a thousand pounds a year! On sweets and stuff.” – Kate

Not sure how much you can afford to save? Start small – maybe just putting your change each week into a jar.

If that works, try setting aside a bit more on a regular basis.

Be realistic – it’s better to commit to a smaller sum you’re confident you can manage than a bigger amount that you give up on.

Set yourself a target: say an emergency fund of £200.

Once you’ve reached that, raise the bar and go for a bigger sum. Use our Savings calculator to see how your savings could build up.

When an emergency does crop up, use the emergency pot, but then carry on saving to build it up again.

Step 3 – Get started

Top tip

Set up a regular payment (direct debit or standing order) to automatically transfer a set amount into your savings each month.

No time like the present! Decide where to stash your savings. For now, that might simply be a coin jar.

But make sure you transfer your hoard to a savings account whenever it has built up to a tidy sum.

This will keep the money safe, for genuine emergencies, and reduce the temptation to spend it on a whim – and you could earn some interest.

Maybe you already have an online bank account that lets you set up a separate pot for your emergency fund.

Otherwise, open a straightforward instant access savings account.

Comparison websites are a good starting point for anyone trying to find a savings account tailored to their needs.

We recommend the following websites for comparing savings accounts:


  • Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
  • It is also important to do some research into the type of product and features you need before making a purchase or changing supplier.
  • Find out more in our guide to comparison sites.

Step 4 – Watch your savings grow

Check your progress every few months.

Set yourself small targets along the way – you could set an app on your mobile, a chart on the fridge door or even just a line on your coin jar to record your progress.

Have a bit of a celebration each time you hit a target.

Review your savings account at least once a year to check you’re getting the best rate of interest.

Make sure you use your yearly cash ISA allowance so that you don’t pay tax unnecessarily.

Many ISAs tempt you with a bonus for the first few months or year but then fall back to dismal rates.

What to do

  • Budget for the unexpected – it always happens.
  • Open a savings account if you don’t already have one – go online or pop into your bank or building society.
  • Set up a regular payment into your savings account every month. Use this downloadable template (DOC 26KB) to send a standing order instruction to your bank.

Watch our video to see your tips on saving money

Read a transcript of this video

This article is provided by the Money Advice Service.