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How to save money

Anya Gair
Last Updated 13 June 2024

If you’re in your 20s or 30s, it can feel like everyone around you is buying a house, getting married, and going on 3 holidays a year. Meanwhile, you’re left scratching your head and wondering how on earth they’re affording it. If you want to save money for big life events and adventures, we can help! Let’s explore how much you should save per month, whether £200 is enough, and whether it’s ever too late to start saving.

In this guide

How much should I save per month?

How much you should save depends because everyone’s financial situation and goals are different. But a good rule of thumb to follow is the 50/30/20 rule. This means you spend 50% of your earnings on essential costs, like your rent, utilities and groceries. Then 30% of your earnings on wants, and 20% goes towards savings. If you’re struggling to save for the future, the 50/30/20 rule can give you clarity and help you work out what’s most important to you. 

For example, if you earn £2,000 a month after tax you might spend:

  • £1,000 on needs
  • £600 on wants
  • £400 on savings and investments

Once you’ve made a note of your monthly expenses and split them into the three categories, you’ll probably find it easier to manage your budget. You’ll be able to see your wants vs needs at a glance, making it easier to tweak your budget and change your priorities. 


What about debt?

It’s up to you how you categorise debt repayments. Many people put it in the third category along with savings and investments, but if you have any high-interest debts or priority debts (debts which could result in the loss of your home, energy supply, or essential goods or lead to a prison sentence) pay these off before you save or invest.

If no matter how hard you try, you struggle to stick to this, don’t beat yourself up! While the 50/30/20 rule is a good guide to follow, it can be difficult to follow the letter if you have a higher cost of living. A single person living in Leeds with a £30,000 salary and no children may find it easier to save money than two parents living in London with a combined salary of £80,000, for example. Although the couple have a higher household income, their expenses are likely to be much higher too. 

With the cost of living on the rise, many people are spending more than 50% of their income on necessities. Londoners typically pay over half of their weekly wage on rent alone. If you then have to add the cost of other necessities such as transport, utility bills and food, it can make it hard to abide by the 50/30/20 rule. 

Instead of comparing yourself to others, it can be helpful to focus on setting your own savings goals and work backwards from there. Whether you want to buy your first home, pay for a new car in cash, or get married in an Italian villa, work out how much your goal will cost you and when you’d like to achieve it.

For example, if you want to save a £25,000 house deposit in 5 years, you’ll need to save £5,000 a year or £416 a month. Once you’ve got these numbers in front of you, it’s easier to visualise your end goal and motivate yourself to save. 

Need help reaching your goals? These tips might help!

Learn more: Why you should start saving for a house today

Boost your house fund with a free 25% bonus on your savings

Save up to £4,000 a year in a Lifetime ISA and you’ll get a 25% bonus off the government towards your first home. Plus, with a Tembo Lifetime ISA you’ll also get our market-leading 4.3% AER (variable) interest rate.

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5 top tips on how to save money:

  1. Set a budget - and stick to it! Take a look at your finances and work out how much you spend each month, and set a savings target. Make sure it’s realistic, and check your budget regularly to see if it works, and where you might need to adjust.
  2. Understand where your money’s going. Taking an honest look at your spending can help you realise where you might be spending more than you think, and where you could cut back.
  3. Reduce your costs. Shop at a cheaper supermarket, cycle to work, cancel unnecessary subscriptions, buy things second-hand - there are lots of small ways to reduce your spending and help you put more away. 
  4. Focus on building new habits. When you build better money habits, this helps you to save without thinking about it. For example, automatically transferring money into your savings each month once you get paid, bringing homemade lunch into work to reduce your food bill and keeping your lifestyle costs similar - even when you get a pay rise or promotion - can all help build your positive money habits.
  5. Open a Lifetime ISA. You get a free 25% boost to your savings each tax year towards your first home or retirement.

For more tips on how to save money, read our guide on the 17 ways to smash your savings goals.

Sign up to our Lifetime ISA app, and get tips and tricks on how to save money for your first house quicker.

Is saving £200 a month good for the UK?

Absolutely! Saving £200 a month is really impressive, especially considering how difficult it can be to save for the future. Saving £200 a month will leave you with £2,400 in savings after 12 months. Open an account with a competitive interest rate and you’ll increase your savings even further and reduce the impact of inflation. 

Let’s imagine you save £200 a month and earn an interest rate of 4.3% AER (variable) which is paid monthly. After one year, you’d have £2,457 - £2,400 of your own money, plus £57 from interest growth. After three years, you’d have £7,699 -  £7,200 from your own money, £499 from interest growth. And after five years, you’d have £13,412.

If you’re saving a deposit for a house, a Lifetime ISA (LISA) will boost your savings even more! Save up to £4,000 a year in your LISA and you’ll get a 25% bonus off the government towards your first home. Saving just £200 a month would result in an extra £600 each year thanks to the government boost! If you can contribute the maximum £4,000 each year, you’ll get the full £1,000 bonus each year. With a Tembo Lifetime ISA, you’ll earn 4.3% AER (variable) interest too!

Learn more: Cash ISA vs Lifetime ISA: which should I pick?

Is 30 too late to start saving?

No, 30 definitely isn’t too late to start saving! In fact, almost 59% of 25 to 34-year-olds have less than £1,000 saved. It can be hard to save money at this age, especially if you’re renting or paying off a mortgage, keeping in touch with friends and trying to find your feet in your career. 

You might also struggle to save if you’ve got kids or you’ve spent a lot of money on a wedding. And even if you’re not getting hitched or becoming a parent, other people’s big life milestones can affect your bank balance too! It costs £981 on average just to attend a wedding. Throw engagement parties, hen/stag dos, and baby showers into the mix and we don’t blame you for prioritising the present over the future. 

If you’d like to buy a house one day, we can help! Whether you can save £33 a month or £333 a month, there’s no better way to save a house deposit than a Lifetime ISA. 

Open a Tembo Cash Lifetime ISA today

Save up to £4,000 each year and earn 4.30% AER (variable) interest on your savings plus the 25% bonus from the government. Over 5-years, you’ll have hundreds more in your pocket than with the next best rate on the market.

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