29 June 2017

5 ways to add more to your savings account

Ever wondered how some of your friends manage to go on luxury holidays or afford a sports car when they’re on a similar wage as you? Instead of secretly envying them as they upload snaps to Instagram, take note: you might be able to learn from their saving style!

Even with the best intentions, dragging yourself out of bed at 5.30am to squeeze in a pre-work gym class is tough until it becomes part of your routine. And it's the same with saving too.

We spoke to renowned psychologist Daniel Kahneman about his book on behavioural economics – Thinking, Fast and Slow. He highlights that understanding the types of things which influence your financial decision-making could mean you manage your money better.

5 ways to become a super-saver

To be a super-saver, you’ll need to focus your efforts on five important areas, which Kahneman describes in his book as “behavioural economic biases”. That might sound a bit complicated but they’re actually quite obvious things once you’re aware of them.

1. The bigger picture

We all know that our morning coffee or shop-bought lunch adds up over the working year, but it’s difficult to remember that when you’re suffering from an afternoon sugar low
or facing sandwich-making late in the evening.

Kahneman and researcher Amos Tversky, have published research in this area and called this “Present Bias”, which is the idea that more emphasis is placed on immediate rewards than long-term goals.

For example, that tasty looking slice of cake at your local coffee shop will take precedence over keeping the money and putting it towards a long-term savings goal, like paying for a holiday or saving for a home. 

calendar with date marked

Tip: Try to think about how you’d spend a year’s worth of lunch money, rather than the cost of each individual sandwich. And if you have a banking app like ours, you could put the money you would normally spend straight into your savings account, without even logging in.

calendar with date marked

Tip: Try to think about how you’d spend a year’s worth of lunch money, rather than the cost of each individual sandwich. And if you have a banking app like ours, you could put the money you would normally spend straight into your savings account, without even logging in.

2. Are you too comfortable?

It’s easy to stick with the energy provider that you’ve always used instead of shopping around. But according to uSwitch, comparing and switching suppliers could save you as much as £458, while turning your thermostat down by 1 degree could trim £60 off your annual bill.

This can also be true of financial products such as insurance too, so note down your renewal dates and make sure that your policies don’t renew automatically before you have the chance to look around. It’s also a great opportunity to check that they still meet your needs or that there isn’t a better deal elsewhere.

screen with magnifying glass

Tip: It’s a good idea to check how other providers compare, but don’t forget that haggling with your existing supplier is also an option. According to MoneySavingExpert.com, it could actually save you hundreds of pounds.

screen with magnifying glass

Tip: It’s a good idea to check how other providers compare, but don’t forget that haggling with your existing supplier is also an option. According to MoneySavingExpert.com, it could actually save you hundreds of pounds.

3. Don’t be seduced by sales

The behavioural bias of “framing” is a powerful sales tool which, Kahneman tells us, means we’re more likely to believe that “20% off” is a better deal than paying “80% of the full price” – even though they're exactly the same thing! So no matter where you do your shopping, remember that 20% off is still an 80% cost.

shop front

Tip: Plan your shop in advance and go with a list, then ask yourself whether you’d have bought it if it wasn't in the sale. Dodging the big brand deals and buying own-brand products is also usually still cheaper, so why not see whether you notice the difference?

shop front

Tip: Plan your shop in advance and go with a list, then ask yourself whether you’d have bought discounted items had they not been on sale. Dodging the big brand deals and buying own-brand products is also usually still cheaper, so why not see whether you notice the difference?

4. Look to the future

After a well-deserved pay rise or other change to your income, it’s tempting to improve your standard of living. But if you can keep to your existing budget and save the difference, you may be able to reach your savings goals a lot quicker. Alternatively, split the difference between savings and your current lifestyle.

piggy bank

Tip: Pay your savings account first on pay day. Or even better, set up a standing order so it goes straight into your savings account when you’ve been paid.

piggy bank

Tip: Pay your savings account first on pay day. Or even better, set up a standing order so it goes straight into your savings account when you’ve been paid.

5. Room for improvement

Of course, even super-savers can keep improving the way that they manage their money. If you’re competent, overconfidence can actually prevent you from saving more.

The “Overconfidence bias”, means that just because you've always saved in a certain way, it doesn’t necessarily mean it’s the most effective or financially beneficial way for to you save in the future.

pad and pencils

Tip: Don’t get too complacent. One way to do this is to keep track of a budget and start to monitor how much you’re saving compared to previous months, or even years.

pad and pencils

Tip: Don’t get too complacent. One way to do this is to keep track of a budget and start to monitor how much you’re saving compared to previous months, or even years.

Whatever it is that you’re saving for, a great way to start is by setting yourself a savings goal. And if you’re a Nationwide saver and use our banking app, you can even set up a savings goal and keep track of how you’re progressing on the app.

Find out more about the Nationwide banking app

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