Whether you’re saving for something special or simply for a rainy day, here are some tips to help you get the most from your savings.
Useful savings tips
1. Understand your budget
The first step to understanding your budget is to fully understand what you currently spend your money on; only by doing this can you know what you can comfortably afford to save. Begin with your income, after tax, national insurance and any other deductions. Then deduct your regular outgoings, such as your family’s bills (including rent or home finance payments), food, transport, clothes, holidays, other big purchases such as electrical goods or furniture, and how much you spend on going out.
If you do this properly, the amount left should be what you can comfortably afford to save.
2. Set up an emergency fund
It makes good financial sense to set up an emergency fund – a reserve of cash that will keep you going in the short term, should you need it. The amount you save will depend on your outgoings and your lifestyle, but savings equivalent to three months’ income, after tax, is a sensible amount.
As you could potentially need this money at short notice, make sure you don’t place it in an account where it is tied away for a long period of time.
3. Make saving a habit
Saving a little money every month can make a big difference, not only to your bank balance but also to your peace of mind. If regular saving is something that you are not used to, it can seem a daunting task, but it doesn’t have to be. A simple step is to tell your bank to set up a monthly standing order into a separate savings account. If you are paid monthly, it is a good idea to arrange the transfer to take place just after pay day.
How much you are able to comfortably save will depend on your own personal circumstances, but as little as £50 a month will accumulate nicely over a period of time without impacting too much on your disposable income.
4. You can profit without receiving interest
Whilst some conventional banks offer “interest free” accounts to Muslim savers, Islamic banks allow their savers to make a competitive return on their savings, by investing their customers’ deposits in Sharia compliant activities and sharing the profits.
For example, whereas £1,000 invested with a conventional bank in an interest free account remains unchanged over time, £1,000 invested with Al Rayan Bank in a Fixed Term Deposit generates significant returns per annum.
5. It’s time to think about your pension
Most people in the UK either do not have a pension or are not saving enough into their pension scheme to support the standard of living they wish for in their retirement.* A pension is a tax efficient long-term savings plan, where you make regular contributions throughout your career so that you are provided with an income in retirement. Generally you can access the money in your pension fund from the age of 55.
There are many different types of pension and you should seek advice from an Independent Financial Advisor (IFA) before you take any action.
6. Review your savings
It is prudent to review your savings every few months to ensure that the rate of return you are receiving is still competitive. Click here to compare the expected profit rates of Al Rayan Bank savings accounts.
Compare our savings accounts
Whether you're looking for instant access to your funds or are happy to lock your money away for years, Al Rayan Bank has a complete range of ethical, Sharia compliant savings accounts.