Best ways to save money short term

Whether you want to save for a deposit on a new house, pay for your wedding, renovate your house, boost your emergency fund, or clear some bad debts, you’re probably looking for the best way to save money short term. Well, we’ve got your back with this guide to the best short-term savings options and strategies, which can help you to reach your goals faster.

What are short-term saving goals?

Before we dig into saving money short term, let’s take a look at what we actually mean by short-term saving goals. There are no hard and fast rules about what ‘short term’ means in this context, but generally speaking it relates to financial goals that you can smash in a year. Depending on your specific goal, and the timeframe you are working with, anything from saving for a few months to book a holiday to saving for up to five years for a house deposit could be viewed as a short-term savings goal. 

While short-term goals can be achieved as one-off wins, they can also be important stepping stones to enhancing your financial wellbeing and smashing your long-term financial ambitions. Hitting milestones, and making definite progress with your money, is a great way to boost your financial confidence and find the motivation to take the next step.

How to save for short-term goals

Now we’ve outlined what we mean by these types of financial ambitions, let’s look at the best way to save for short-term goals. This guide is full of tips and hints to help you create a savings plan to help you achieve your goals. Let’s get into it.

Set realistic goals and name them

Understanding what your financial ambitions are, and how they relate to your overall financial wellbeing, is the first step on the ladder towards reaching your short-term saving goals. Identifying your short-term goals, and writing them down, can help you to stay motivated to reach your goals.

It’s a good idea to start with realistic, attainable short-term saving goals. To do this, work out how much money you will need to achieve what you want. Then break down that total into monthly chunks over a year (or however long you want to save). Are those monthly amounts affordable? If you’re not sure, using a budget will help (see the next tip).

If you set realistic goals you are more likely to achieve them, and that will help you to stay motivated towards your overall plan. Making things too difficult, or giving yourself too steep a mountain to climb, can break your focus and feel overwhelming. It’s important to be honest with yourself, but it doesn’t mean you can’t dream big. Just try to be practical when it comes to working towards your plans.

Rather than simply deciding to “save more money”, consider naming the specific thing you want. If you create a savings pot, edit the name of it to reflect your financial ambition. Call it “Our wedding day fund” or “My Big holiday adventure”. This can help you to stay focused on what you are working towards, and why.

Read this blog for more tips on how to set a goal that motivates you.

Create a budget

A budget is a great way to organise your financial plans, whether they are short-term or long-term. It’s a way of understanding your income and expenses so that you can boost your savings without upsetting the balance of your day-to-day spending.  Simply put, a budget can help you to stay on target for your short-term saving goals.

Creating even a basic budget can help you control your finances and save money quickly. But where do you start? The first thing to do is to get a clear view of your cash flow over a standard month - that is your income and expenses. This means grabbing all your bank statements, your regular bills, and any debt repayments.

What you’re trying to do here is compare all of your expenses against your income. Are you already saving something every month, are you draining your money to £0, or are you overspending? Remember to include the income of whoever is involved in your finances.

Now separate your expenses into three categories: what you need to spend (like rent and bills), what you spend on your goals (debt payments or savings) and what you want to spend (like luxuries and entertainment). The key is to use your budget to identify where you can make savings and sacrifices to balance your finances and free up cash.

To help you work out how much of your income to dedicate to your wants, needs and goals, you could use the 50/20/30 budgeting rule? That’s 50% for what you need, 30% towards your goal, and 20% leftover for what you want. You can shift the needle on those numbers to make them suit you better, but it’s a great guide. If it doesn’t feel right for you, read this blog to discover a variety of options. 

If your essential expenses, like your rent and bills, are more than 50% of your income you might want to consider reviewing your bills to make sure you’re getting the best possible deal. Check comparison sites or speak to your providers to see if you can save on your expenses. 

If your non-essential expenses, like luxury items and entertainment, are taking up more than 30% of your income, it might be time to look at your recurring bills, such as streaming subscriptions, memberships, and forgotten Direct Debits. Creating a budget is a fantastic way to spring-clean your finances. Be honest with yourself and get rid of anything that’s draining your cash unnecessarily.

Once you have got your wants and needs in shape, you will hopefully have freed up at least 20% to put towards your short-term saving goals. You can now calculate how long it will take you to reach it. Will it take you longer than a year or two? If so, you could reduce your spending on your wants to get there quicker. Your budget can help you organise these decisions.

Pay off debts first‍

If you want to supercharge your saving power, a great tip is to clear your debts first. It is very likely that the interest you pay on your debts will far outweigh any interest you earn on your savings. Clearing your debt sooner will give your savings a boost and help you reach your goals faster.

It can take some determination and hard work, but freeing yourself of any high-interest debts can help you to build a stronger financial foundation from which to build your short and long-term financial future.

Open a dedicated savings account and automate your payments

Once you’re ready to start working towards your goals, it's a good idea to look for the best place to save money in the short term. To stay focused on saving fast, why not open a dedicated savings account? Not only does this give you a focal point for your goal, but it also helps to reduce the temptation to dip into your savings to cover your day-to-day spending.

For short-term savings you may want to find a high-interest, easy-access account. Longer-term savings can be locked away for greater durations, which will often return higher interest rates, but your short-term goals may require better access to your money. Cash ISAs can also be free of UK Income Tax or Capital Gains Tax, so you’ll keep more of the money you make.

You can also automate your payments, to stay focused on your ambitions rather than being tempted to use your money for other things. Set up Direct Debits to coincide with your salary going into your account, and your payments towards your plan will be made before you even have a chance to spend the money elsewhere. 

Another option for short-term saving goals is to make your money work harder for you with Loqbox Save. Just tell us your savings goal and we’ll loan it to you and lock it away for a year. Then we report your responsible payments to the top three credit reference agencies (CRAs) in the UK: Experian, Equifax and TransUnion, which can help to grow your credit score.

On large loans like mortgages, better interest rates can literally save you £1,000s in the long run, so what are you waiting for? At Loqbox we can help you to achieve this goal by giving you the tools you need to build your savings and your credit score at the same time. 

We’ll talk more about how a better credit score can help your short-term goals later in this article. 

Improvements to your credit score are not guaranteed. 

Get a side hustle

If you’re struggling to get enough cash together to put towards your short-term goals, and you need to add some fuel to your savings fire, you could think about getting a side hustle. A side hustle is a secondary income that you add to your current income. It could be another job that you do in the evenings or at weekends, or it may be a more passive income from selling stuff or services. 

Side hustles can really help to boost your savings and get you closer to your short-term goals quickly. But it’s important to keep your mental health and wellbeing in mind if you’re adding days or hours to your working week.

You can build up a passive income by selling things that you make yourself, or by teaching people how to do something you’re already skilled at. Online tutoring, teaching people how to play an instrument and recording seminars can be great ways to make extra cash if you have some unused talents.