Putting aside even the smallest amount of money can be a winning strategy
Thursday 07 Mar 2019 Author: Daniel Coatsworth

We’re regularly told by the media that investing could make you a millionaire if you save hard. While we’d all like to have that much money, the hard truth is that becoming a millionaire is beyond the reach of many people.

Some of these millionaire articles have been criticised because they imply you already need to be well-off to hit the goal. The idea that you’ve got a ‘spare’ £20,000 to invest each year in an ISA after paying all your living costs is unrealistic for a large number of people.

These sums can be off-putting and make some individuals think they don’t have a chance with investing. That mustn’t happen – we need to encourage everyone to save full stop.

The focus should be on ways of developing a proper savings habit, even if you only begin by stashing away a small amount of money. Over time you can look to increase contributions.

The trick is to be organised with your finances. Each month I update a spreadsheet that shows exactly how much money I need to pay regular bills and occasional costs like a car MOT or paying for school dinners. I shift a set amount of money into a different current account for general spending such as going to the supermarket or a night in the pub.

Finally I allocate money into different savings accounts. Some of these involve the same amount every month such as putting money into an investment account or emergency cash pot, the rest depends on what’s left from my pay packet which mainly goes towards holidays.

It is through such a process that direct debits are savers’ best friend. They enable you to automatically shift a set amount of money each month into a savings jar – such as a cash or stocks and shares ISA – and reduce the risk of you frittering away that money on something else.

Having your casual spending in a different account also makes it easier to see how much you have to spend each month. To reduce temptation of dipping into your ‘bills money’ you can build a fortress by keeping that cash in an account that cannot be accessed via a debit card (and thus a cash machine).

Some banks make life easier by providing multiple savings accounts linked to your current account so you can label the jars to help better manage your money.

Someone putting as little as £50 into their stocks and shares ISA each month could invest £200 into a fund every four months and the transaction fees would only represent a very small amount of the total investment.

Use any pay rise as a reason to increase the amount of money you put into your savings accounts. And don’t forget there are various places to get a ‘top up’. Anyone lucky enough to qualify for a Lifetime ISA will get free money via the Government bonus to boost their portfolio. Pensions also benefit from tax relief.

One of the hardest parts of saving is managing your money in the first place. Being organised and squirreling away even the smallest of sums is a great strategy. Win at this task and you’ll greatly increase your chances of becoming a wealthier person in the longer term.

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