With the new year rolling out, many people will be making plans to build a savings pot, and perhaps consider how their money could be working harder for them, so it is well-placed to grow.
It can be a good time to consider how to get into new habits, including saving and investing for the future.
According to financial information website Moneyfacts, the choice of cash savings deals on the market reached the highest point in December 2024 since its records started in 2007, with more than 2,000 products available, so now could be a good time to see what’s available.
Whether you are a seasoned saver or are taking your first steps into the world of investment, Clare Francis, director of savings and investments at Barclays Smart Investor has some tips to help grow a handy pot of cash:
1. Create and stick to a budget
“The importance of a well-structured budget cannot be overstated,” says Francis.
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She suggests reviewing your monthly income and outgoings to identify areas where you can cut back on non-essential spending.
“The money you save can be used to pay off debts, moved into a savings account, or even invested for your future,” Francis adds.
“By taking a proactive approach to budgeting, you not only ensure that every pound is working as hard as possible for you, but you also cultivate a mindset for long-term financial success.”
There are plenty of free budgeting tools available online which could help, such as the budget planner from the Government-backed MoneyHelper service.
2. Think about your financial goals and what you are saving for
“You don’t need to have all your life goals nailed down perfectly, but having a rough idea of what you’re aiming for and how much money you’ll need is helpful,” says Francis.
“It provides a useful starting point to weigh up the best options available to you.”
Many people keep all their cash in savings accounts. But Francis suggests that if you’ve got money you can afford to put away for the longer term, perhaps for five years or more, then investing could be worth considering.
Money held in investments may potentially see stronger growth over the longer-term than savings held in cash.
But people money putting money into investments will need to be comfortable with the risks and that they could potentially get less money back than they put in.
Analysis by Barclays indicates that many savers could be missing out on potentially higher returns.
It estimates that 13 million UK adults hold £430 billion of “possible investments” in cash savings – which could potentially be huge opportunity if more people feel confident and empowered to invest.
3. Consider how ‘hands-on’ you want to be
Choosing where and how to invest money can feel daunting, which may for some people be a barrier to moving some of their money from cash savings into investments.
“Many people face ‘choice paralysis’, where they are afraid of making the wrong decision, and it prevents them from taking the next step,” Francis explains.
She also highlights the fact that many providers offer ‘ready-made’ investments funds, which may be a good place to start for some people.
“These types of funds provide global diversification and invest in a mixture of cash, bonds and shares but the levels of risk vary,” explains Francis.
“So, all you need to do is to pick a fund with a level of risk that you’re comfortable with.”
4. Look for financial guidance from reputable and regulated sources
Francis says: “Our recent research found that a quarter of Brits are now turning to social media, community messaging apps and online forums for information about investing.”
Francis suggests that when looking at content from a financial influencer, or “finfluencer,” check out their bio to see if they have a background in finance or experience in the investment field.
“If you struggle to reassure yourself that they know what they are talking about, be cautious about acting on their guidance,” she says.
She also warns that, with many investment scams starting on social media, it’s important to “sense check” any information being shared online. Consider whether claims about high investment returns, for example, seem too good to be true.
It’s important to remember as well that fraudsters may use deepfake videos or other bogus information to give the false impression that an investment scheme has been endorsed by celebrities.
If you’re unsure about a particular firm, remember that regulator the Financial Conduct Authority (FCA) has a warning list of firms on its website as well as a financial services register of firms and people involved in regulated activities.
5. Consider saving and investing regularly.
“Just as saving monthly is a good habit to get into, so is investing regularly,” says Francis.
“Many people think you need a large amount before you can start, but that’s not the case.”
Dripping regular amounts of money into investments over time may also help to smooth out any ups and downs in the markets.
Francis explains: “Because you’re drip-feeding money in regularly, it doesn’t matter whether the markets are up or down – if they’re down, your money goes further and will buy you more units in whatever you’re investing in.
“This is known as ‘pound cost averaging’ and it can help smooth your overall investment returns and reduce the risk.”
And when putting money into cash savings, you could also make the most of “round-ups” in banking apps, which automatically deposit small amounts of change into a savings account.
Many people can earn some interest from their savings without paying tax.
Savers considering what type of account will work hardest for them in 2025 may also want to bear in mind the personal savings allowance (PSA).
Under the allowance, basic rate taxpayers can earn up to £1,000 annually in savings interest tax-free.
ISAs are ring-fenced from the taxman, so people may want to consider moving money into one if they are concerned about breaching the PSA.
And while long-term savings and investments are important for future goals, it’s also worth making sure you’ve got an easily accessible pot of cash put by for emergencies.
Before you know it, you’ll be growing a nice little nest egg for 2025 and beyond.