Sammie Ellard-King
I’m Sammie, a money expert and business owner passionate about helping you take control of your wallet. My mission with Up the Gains is to create a safe space to help improve your finances, cut your costs and make you feel good while doing it.
Quickfire Roundup:
If you want to save £5k a year, you need to put away exactly £416.67 each month. This can be achieved by budgeting, cutting down on luxuries, freelancing, selling items and reducing your bills.
Investing is also a good option, but only if you have the right know-how.
By saving 5k, you could be financially comfortable, be able to clear your debt, or reach future financial goals.
How to save 5k in a year? Well, you’ll likely have to cut down on your spending somewhat.Â
Even if you’re earning good money, it can be hard to set aside exactly £416.67 every single month – especially through the ongoing cost of living crisis.
However, once you learn the tricks of the trade, reaching this savings goal will be easy.
Read on as I reveal the best spending habits you can adopt to save half a grand in 365 days.
Let the latest technology help get you there with the best money savings apps.
Table of Contents
How Much is Needed Per Month to Save 5k?
To save £5,000 in a year, you need to save £416.67 per month. This translates to £104.17 per week and £14.88 per day.
When you consider how much it would cost per day, £416.67 per month doesn’t appear too out of reach. As long as you cut down on non-essentials and spend within your means, putting aside £14.88 per day shouldn’t be too difficult depending on salary of course.
Once you start saving, you may struggle to stop – especially once you start building it up.
How to Save 5k in a Year: Top Tips
So, you’ve set a savings goal, you’ve downloaded a savings app, and you’re ready to put away as much extra cash as possible to save £5,000.
However, you’ve still got monthly bills to cover, a social life to pay for, and general expenses to make. So much so, that your financial goals appear completely out of reach.
What I would do is set myself a number of goals leading up to £5k. So for example, this could be £100 / £500 / £1000 / £2500 & £5000. This way I can achieve small wins on the way to getting there keeping me on track and motivated.
Instead of spending money the same way as you always have, follow these tips to make your income stretch much further:
Budget
Although obvious, it’s worth mentioning that budgeting is the only way you can guarantee you’ll have £416.67 leftover at the end of each month.
Instead of spending recklessly, you should set daily limits and stick to them.
Being more aware of your daily allowance makes you warier about your spending. You’re definitely more likely to overlook items you don’t need in favour of the essentials.
You can also use my free monthly budget calculator to help you plan.
Cut down on luxuries
While a good job might make luxury items, holidays, and experiences more easily affordable, it doesn’t mean you have to buy them.
Making an effort to go out for dinner less, or booking fewer holidays, can make your disposable income stretch much further than you could imagine.
Although this might be difficult in the short term, it will definitely pay off in the long term. Once you’ve successfully saved up your 5k, you can more confidently spend on luxuries.
You could also look to remortgage to bring your average monthly mortgage payments down or look to relocate if you’re renting. These are usually your biggest costs so gains here can make a huge difference.
Sell items and/or take on a freelance role
Selling clothes, furniture, and technology that you no longer use can definitely help you save £5,000 in a year. Especially if you value each item accordingly and price them for what they’re worth.
The more you sell, the better your financial situation. Not only does this make saving easier, but it also means you can spend more money on luxuries while you save.
Additionally, if you’ve got time, you could start a side hustle to earn cash. A spare few hours a week could be turned into dog walks, guitar lessons, or childminding.
Whatever skill you possess, you could easily turn it into extra money.
You could even see if any part-time or temporary roles are going online. Freelance writing and survey taking don’t take up a lot of time, but can deliver you a good amount of extra money.
Lower your bills
There are definitely streaming services, apps, and other services you could do without. There are also other ones that you could endeavour to get a lower subscription rate for.
For example, if your phone bills are excessive, you should contact your provider and see if there’s a better affordable option available.
Things like WiFi are sold at competitive rates. If you simply contact your provider and tell them that you’ve found a cheaper rate elsewhere, they may offer you a better price there and then.
So, if it’s not obvious that a service provider offers lower rates, it’s always worth phoning and asking.
Invest
Investing can be a smart strategy to reach your £5k savings goal. Here’s a quick guide on how to do it:
Start Small: You don’t need a fortune to start investing. Begin with what you have, even if it’s just a small amount, and aim to regularly add to your investments.
Diversify: Spread your money across different investment types – stocks, bonds, ETFs – to balance risk and reward. Remember, don’t put all your eggs in one basket, especially if that basket is known for being volatile (looking at you, crypto).
Reinvest Dividends: If your investments pay dividends, reinvest them. It’s like rolling a snowball down a hill – it can grow over time, helping you reach your £5k goal faster.
Automate: Consider setting up automatic contributions to your investment account. It’s like having a personal savings assistant who never forgets to put money aside.
Patience: Investing is not a get-rich-quick scheme. It’s more like growing a tree – it takes time, but with patience and care, it can bear fruit.
Seek Advice: If you’re new to investing, consider seeking advice from a financial advisor. They can help you navigate the investment jungle.
Remember, the key to reaching your £5k goal through investing is starting early, being consistent, and having patience. It’s not about timing the market, it’s about time in the market.
However, it’s important to spend and invest wisely, or else you’ll never improve your financial situation. In fact, you could even make it worse.
Alternatively, you could deposit money into a stocks and shares ISA and gain a diverse portfolio of investments.
Let the latest technology help get you there with the best money savings apps.
Why Save 5k in a Year?
If you’ve found yourself with a job that pays around the UK average wage (£33k a year), it would be prudent of you to save some of it.
Saving 5k over the year provides you with a considerable degree of financial protection in the future by making you more financially comfortable and achieving future expenses.
With the average savings by age in the UK vastly varying and the average savings of those 35-45 being just £6,000! That means saving 5k in a year will get you just under average if you fall into that bracket.
It makes you more financially comfortable
If you’ve been out of work before, you’ll know how hard it can be to get by. Even when you’re in full-time employment, hard financial times can befall you unexpectedly.
In these instances, having 5k in the bank makes things much easier.
Saving 5k could also help you clear any debt you may have accrued up to this point in your life.
It helps you afford future milestones
However, saving 5k doesn’t have to only be about saving up for worst-case scenarios. 5k can also go towards positive things, like holidays, your wedding, your new home, renovations, and so on.
Once you achieve the 5k in 1-year target, making 10k in 2 years won’t seem so difficult. Small milestones are important in saving money.
With 5k in the bank, you can more confidently plan your future. It makes your ambitions appear more feasible and your goals easier to attain.
It improves your spending habits
Plus, with a 5k target, you can better control your spending habits and pick up saving tips that’ll help you consistently save money in the future.
Once you feel the satisfaction of saving up 2.5k in 6 months, there’ll be no stopping you.
Overall, saving 5k puts you and your bank account in a much healthier position. It financially prepares you for whatever the future may bring.
How to Make Saving Money Easier: Top Savings Tools
Now that you know my top saving tips and why saving is important, let’s look at the saving tools you’ll require to reach your 5k target:
Let the latest technology help get you there with the best money savings apps.
Savings account
You’ll need somewhere to put your 5k, won’t you? If you’ve already got a savings account, I’d recommend getting a separate one.
This way, you can see how much money you’re putting into this saving challenge and this saving challenge only.
Having a separate account also allows you to better manage your spending. With a savings account, you’re less likely to withdraw from your target 5k.
Best of all, you can get good interest rates with a savings account from a high street bank. For a regular savings account, it’s possible to get as much as 7% interest.
This makes it easier to save money beyond your one-year 5k target.
ISA
If you’d rather not pay taxes for your savings ever, then you should go for an Individual Savings Account instead. An ISA works similarly to a savings pot. The big difference is that you don’t pay tax on the first £20,000 that you deposit.
Of course, 20k is a lot more than 5k. However, who is to say you won’t get a taste for savings once you hit your 5k milestone?
Plus, ISAs are better suited for long-term investment. Keep your savings journey going indefinitely with an ISA.
Still confused check out our ISAs for Beginners post
Savings app
Don’t just settle for a savings account – go a step further and sign up for a savings app. These apps often come with their own accounts where you can deposit money, but also feature other money-saving benefits.
The best options include Plum, Starling, Chip, and Monzo.
Monzo is particularly good for collecting your loose change and putting it in a savings pot. By the end of the month, you will have collected a decent amount of change.
If you’re planning on making investments, it would be a good idea to download an investing app, too.
FAQs
How does the 365 money challenge work?
This challenge is a clever way to save money, which involves you incrementally saving over the year. For example, on day 1, you can put away 1 penny, 2 pence on day 2, and so on. On the last day of the year, you’ll be up to £3.65.
At this point, you should have saved around £668. It’s a good long-term saving technique to help you with your savings.
Can you save £10,000 in a year?
It’s definitely possible to save £5,000 in 6 months and 10k in a year, but it takes a lot of financial sacrifices. To reach this financial goal, you’d have to save at least £193.00 per week.
This figure may simply be out of reach to some. To others, it could be possible. Although, it would probably involve living on the bare essentials and turning down luxury spending.
Final Thoughts
So now you know “how to save 5k in a year” – you need to save money big time. To maintain the £416.67 monthly payment, you must cut your spending down massively.
As mentioned in this article, the best way to do this is to start an ISA and download a savings app. You should also cut down on luxuries and budget your spending, amongst other things.
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Disclaimer: Content on this page is for informational purposes and does not constitute financial advice. Always do your own research before making a financially related decision.
