Discover five practical tips that can help you save money for the first time, even in today's challenging economic climate. From paying off debts to using multiple bank accounts, these expert strategies could make a real difference to your financial future.

Five tips for saving money for the first time

Through the ongoing cost-of-living crisis and soaring rates of inflation, saving money is more difficult than ever before. With private tenants in London expecting to pay at least 40% of their income on monthly rent alone, disposable income is extremely limited – but there are still a few opportunities to save some cash.

Whether you’re hoping to save for your first home or you’d like to buy a car, there are several ways you can work towards building a savings pot. Putting some money aside should not only help you to feel more financially secure but more optimistic about the future too. Here’s how.

1. Pay off your debts first

If you're looking to save money and improve your financial situation, one of the first steps you should take is to prioritize paying off any outstanding debts you may have. The longer you stay in debt, the more interest accrues, leaving you owing more money as time goes on.

It's important to make sure that you have absolutely no outstanding debt to any private individuals, companies, or banks in order to start saving money on your own. Ideally, you shouldn't have to choose between saving and paying off your debts. However, if you're serious about building your own financial security, starting from a clean slate is always the best approach.

By paying off your debts first, you can reduce your financial burden and free up more money to put towards your savings goals. This can help you build a solid financial foundation and set you up for long-term success. Whether you're dealing with credit card debt, student loans, or other types of debt, taking the time to pay off what you owe can have a significant impact on your financial future.

2. Look at your monthly expenses

Creating a budget that tracks your income and expenses can also help you identify areas where you can cut back on your monthly expenses. You can use a spreadsheet or an app to track your spending or a more detailed budgeting tool that categorizes your expenses and provides insights into your spending habits. Be mindful of your spending habits and make conscious decisions about how you use your money, such as asking yourself, "Do I really need this item?" or "Can I afford to make this purchase?" before making a purchase.

One way to start is by cancelling automatic payments or direct debits that might have slipped through. Review your bank statements to see if there are any unnecessary expenses that you can cut back on, such as subscriptions or memberships that you're not using regularly. If you pay a monthly premium for insurance or bills, it’s always worth shopping around to see if a better-value deal can be found elsewhere.  You can use apps like Snoop to see your expenses across multiple accounts at a glance and see where you can save money on certain utilities and subscriptions.

Negotiating your bills and expenses is another great way to save money. Many companies, such as internet service providers and insurance companies, offer discounts or promotions to new customers or those who are willing to switch providers. By taking the time to shop around and negotiate better deals, you could save hundreds of dollars per year on your monthly expenses.

Reducing your energy consumption is another effective way to save money on monthly expenses. Small changes, like turning off lights when you leave a room, unplugging electronics when they're not in use, and lowering your thermostat by a degree or two, can add up to significant savings over time.

Also, consider taking advantage of loyalty programs and rewards programs that can help you save money on the things you buy regularly. Many retailers offer loyalty programs that provide discounts or other perks for regular customers, and credit cards and other financial products often come with rewards programs that can earn you cash back or other benefits. Just be sure to review the terms and conditions of these programs carefully, as some may come with fees or other restrictions that could outweigh the benefits. By taking a proactive approach to your monthly expenses, you can make your money go further and achieve your savings goals faster.

When it comes to managing your monthly expenses, building your credit score can also play a significant role in your financial well-being. Before applying for credit cards or any other finance, you might want to consider ways to build your credit score. This could include paying your bills on time, reducing your credit card balances, and monitoring your credit report for errors.

Having a good credit score can open up opportunities for lower interest rates and better loan terms, which can save you money in the long run. It can also give you more leverage when negotiating with lenders or service providers. By building your credit score and maintaining good financial habits, you can set yourself up for long-term financial success and stability.

Don’t be disheartened if you can’t seem to save as much money as your friends, because working out your budget looks different for everyone. It’s more important to find the best methods for your own circumstances.

3. Set SMART goals

Vague goals that aren’t based on a solid structure can be hard to work towards, so setting yourself realistic and time-oriented ones could help you to improve your money-saving strategies. Following the SMART approach means that you should:

• Create a specific goal for your savings

• Think of ways to measure your progress

• Make sure your goal is achievable

• Scale back your goal to make it realistic

• Stick to a pre-determined timeline

In addition to setting SMART goals, it can be helpful to break down your larger savings goals into smaller, more manageable milestones. This can help you to stay motivated and focused, and make your overall SMART goal feel more achievable.

For example, if your goal is to save £10,000 for a down payment on a home, you could set a series of smaller milestones such as saving £1,000 per month for the next 10 months. Celebrating each milestone along the way can help you to stay motivated and track your progress, which can be especially important when working towards long-term goals.

Another helpful strategy is to consider the benefits of delayed gratification. This involves sacrificing short-term wants and needs in order to achieve long-term financial security. While it can be challenging to resist the temptation to spend money on immediate pleasures, such as dining out or buying new clothes, making small sacrifices today can pay off in a big way over time.

By setting SMART goals, breaking them down into smaller milestones, and practising delayed gratification, you can build the habits and mindset needed to achieve long-term financial success.

4. Use more than one bank account

Having multiple bank accounts can be a powerful tool for managing your money more effectively. By separating your savings, investments, and spending into different accounts, you can gain greater visibility and control over your finances. This can help you to budget more effectively, reduce the risk of overspending, and earn more interest on your savings.  Companes like Chip have an instant access savings account with a market-leading interest rate.

Thanks to advances in financial technology, it's now easier than ever to manage multiple bank accounts and track your savings and spending from your mobile phone. Many banks and financial institutions like Starling and Monzo offer mobile banking apps that provide personalised spending reports, automatic payment round-ups, and other useful features to help you save money and build your savings pot.

If you're new to using multiple bank accounts, it's important to choose the right accounts for your needs and ensure that you understand the fees and charges involved. However, many mobile banking apps have free accounts.  With some careful planning and research, however, this approach can be an effective way to take control of your finances and achieve your savings goals.

5. Ask for help when you need it

Lastly, there’s no shame in seeking help or advice if you’re struggling to manage your money. Saving for the first time can be overwhelming, so it’s always a productive idea to consult a trusted friend, family member, or even your local bank to help you plan and organise your finances in a better way.

Asking for help can be a great way to get the support you need to build your savings pot. In addition to consulting friends, family, and banks, you can also seek out resources and tools that can help you learn more about money management and financial planning. This might include online courses, budgeting apps, or financial advisors. With the right support and guidance, you can take charge of your finances and start saving for the future with confidence.

Final word

Keep in mind that even if you have debts to pay off, saving money is still within your reach. It's important to stay committed to your efforts and not get discouraged if you can't save as much as you initially planned. Every little bit counts, and over time, those small savings can add up to a more secure financial future.

To start saving money for the very first time, just remember to:

1. Pay off your debts first

2. Look at your monthly expenses

3. Set SMART goals

4. Use more than one bank account

5. Ask for help when you need it

Happy saving!