Do you have savings goals? Is there an amount of money that you want to reach in the next 12 months? There could be a number of things you want to save a pot of cash for. This could be a holiday, putting money towards a house deposit, or maybe even a new car. There are also people who already have a house but want to do some improvements, so some money will be needed for that. Whatever you are wanting to save towards, let’s have a look at how to save 5k in a year.
Make Saving A Priority
When you want to save money, this needs to become a priority. Just how much do you want to save this amount of cash? If you really do, you will make sacrifices and cut back on spending in other areas of your life. All of this is in order to reach that monetary goal that you have set yourself.
So if your colleagues ask you to go on a night out after work, you need to be able to say no if the money you would use on drinks would be better saved in your account. The same can be said when a new film comes out at a cinema. you get asked to go on a holiday with friends.
We’re not saying to not have a life, but if saving this pot of cash is important, you need to pick and choose the things you do and make that activity of saving money a priority.
Break It Down Into Manageable Chunks
Whatever amount you are wanting to save, you are probably not going to be able to push that aside into a savings account in one go. Breaking the total amount down into chunks and saving little and often will be much more manageable. So if we are looking at how to save 5k in a year, let’s split that down.
- £5000 over the year is £13.70 a day.
- £5000 over the year is £96.15 a week.
- £5000 over the year is £416.67 a month.
You can see that manageable chunks are much more realistic than saving £5k in one go. Think about what you perhaps spend £13.70 on every day. For lots of us that could be a meal deal at work and a coffee on our commute. Cut those out by taking your lunch with you and making a flask of coffee for your journey to the office. Lots of people say that small habits don’t make big changes. But if you can not spend just under £14 a day and redirect that into a savings account instead, this is a simple answer to how to save 5k in a year.
Save With Interest
Where are you saving your money? If you are putting it in a piggy bank at home, that money is not going to grow. You aren’t going to get the benefit of interest on your pot of cash. There are different ways to earn interest, you can put it in an easy access savings account so you can get your money when you need it, or you can lock it away for a certain amount of time to access higher rates.
I would suggest that the difference between easy access rates and those you can get by locking it away for a year isn’t worth not being able to get the money if you need it. At the time of writing this, the top easy access accounts will give you 4.3% in interest. The best 1 year rate is 5.9%. Whilst the extra 1.6% is decent, is it worth having to wait to get your hands on your cash? There are some six-month and nine-month accounts that could be considered.
The 4.3% interest account will turn £5000 into £5215 over 12 months, giving you an extra £215! That’s £17.92 of interest a month. The 5.9% rate will give you £5295 after 12 months. Just £80 more but with the condition of not being able to access the money during the year should you need it.
However, as an absolute minimum, you should open the best easy access account and save your money there.
Final Thoughts
When looking at how to save 5k in a year, or any amount of money really, you need to put the effort in. You need to make sacrifices or you won’t reach your goal. You can still have fun and enjoy your life doing things. However, you need to make decisions and have the willpower to say no.
When you do this, you can put the money aside towards your long term goal.
