Money saving tips: How you could build a ‘financial buffer’ this winter and into 2023 | Personal Finance | Finance
A key money tip is that Britons should put aside some cash for a rainy day, as it could provide protection when they need it. New research by Fidelity International has shown three in 10 Britons are now doing so to protect themselves from the rising cost of living.
People are looking at how they can bolster their savings as individuals lean on the cash they have put aside more than ever before.
But how can Britons build a savings buffer and strengthen their finances this winter?
Emma-Lou Montgomery, associate director for personal investing at Fidelity International, shared key tips exclusively with Express.co.uk.
Firstly, Ms Montgomery urged Britons to create a winter budget, and the first step could be reviewing one’s shopping habits.
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Keeping a rainy day fund is vital, according to the expert, but enhancing this is also key.
Ms Montgomery continued: “While most of your finances will be ring-fenced to cover the cost of household bills, having a rainy-day fund set aside can help to safeguard against unexpected costs.
“If you can afford to do so, it’s a good idea to start by aiming to save around one month’s worth of income, before scaling up further.
“Recently, more people may have had to dip into these savings to cover surging costs, but as long as you keep a record and try to manage how often you do this, then you’ll be able to replenish what was spent slowly over time.”
Many people will decide investment is the right option for them, although it is worth noting capital is at risk and people could get less back than they originally put in.
For those who invest, it is important to stay so for the long-run, Ms Montgomery said, as panicking could make the situation worse.
She added: “During this turbulent time, it’s understandable if you have the urge to pull back on your regular investments – however, it’s important to keep a cool head, avoid knee-jerk reactions, and focus on your long-term goals.
“Adopting a more defensive strategy may support you in achieving the best outcome in the long term. A well-balanced portfolio in uncertain times is also important as this will ensure you’re well diversified and can protect your investments against social, political, and economic changes.”
Finally, it is important for people to be smart about their retirement plans, particularly given the current climate.
Those who have retirement in their path within the next few years will need to decide exactly how they plan to take retirement income.
Ms Montgomery suggests retirement plans should allow a person to cover the cost of essential spending with income that can rise as prices do.
While drawdown continues to be a popular option following pension freedom rules, some may wish to consider an annuity for more stability.
The expert concluded: “You can get an annuity that pays an income linked to inflation – but that comes at a cost. Or it might simply mean leaving your pension pot invested for longer.”
