Help your household budget prosper! Five ways you can grow your money as spring finally brings some relief from the cost-of-living crisis

With bluebells and tulips finally bursting into color, the garden isn’t the only place where green shoots are emerging. After what has felt like an endless season of rising costs of living, skyrocketing interest rates and falling living standards, things are finally starting to look better for the household budgets of millions of people.

Many are still struggling and are now in higher debt, and their finances are so stretched that they are unable to save. Rising municipal taxes and stealth taxes keep the pressure on.

But millions have turned a corner. Inflation has fallen to a two-and-a-half-year low of 3.2 percent, official figures revealed last week. The prices of some items have even fallen: furniture, meat and chocolate biscuits.

Workers will receive their first pay packet, which has been increased by this month’s National Insurance cut, from 10 to 8 percent from April 6. And many are receiving real-term wage increases, as annual wage growth was higher than expected at 6 percent in the three countries. months to February.

But after being forced to manage household budgets with a siege mentality for so long, millions of households are still having to switch modes, according to exclusive figures from Wealth from investment platform Hargreaves Lansdown and savings provider Aldermore.

So how do you ensure your finances evolve from a cost-of-living crisis to a more hopeful spring?

1. Shift savings to higher rates

More and more households finally have a little more left at the end of the month to save for a rainy day. The UK savings rate – the percentage of income that people save – has recovered to 8.5 per cent so far this year, from 6.6 per cent last year, Aldermore said.

The number of people who feel financially comfortable has increased by 12 percentage points to 38 percent, compared to 26 percent last year. But because this ability to save more is new to millions of households, many are simply letting their extra savings accumulate in low-interest checking or savings accounts – some of which earn a pitiful percentage point or two.

Move your money into one of the best, easy-to-access accounts and you can earn more than five percent interest instead. For example, Ulster Bank pays 5.2 per cent on balances over £5,000, and Cynergy Bank pays 5.01 per cent on balances above £1. Even better, move excess funds into a cash Isa, where the interest earned is tax-free. Chip offers 5.1 per cent on balances over £1 and Plum 5.17 per cent on balances over £100.

2. You can afford to take longer to repair

When things are uncertain, it is more difficult to make long-term financial decisions. Understandably, savers prefer to put their money in easily accessible accounts where they can access it in an emergency, rather than putting it in fixed-rate accounts where the money is held until maturity. put away.

But now that things are stabilizing a bit, it may be worth a longer lockdown.

With inflation moving closer to the Bank of England’s target of two percent, the first rate cut is approaching. That’s because the Bank uses interest rates to balance inflation, so when it falls it reduces the need for higher interest rates.

The financial markets are predicting two interest rate cuts this year, from 5.25 to 4.75 percent, the first of which will take place this fall.

When base rates fall, interest rates on fixed-rate bonds are likely to follow suit. If this turns out to be the case, it may be worth fixing this now and locking in a higher rate.

If you’re worried about losing access to your money, opt for an Isa. These can be closed at any time – even before the end of the term.

You’ll miss out on interest and may lose the tax-free status of your cash, but at least you can rest assured that you’ll be able to get it in an emergency.

Shawbrook Bank is offering a one-year fix with an interest rate of 4.71 per cent on balances over £1,000. Fix for three years and it pays 4.4 percent, five years and you get 4.17 percent. If you lock it in for seven years, you can get 3.56 percent.

Note that the new rules that came into effect on April 6 allow you to open multiple Isas within the same tax year, so you can split your money between easy-access and fixed-rate versions.

3. Think long term and invest

As a rule of thumb, experts often suggest building up a pool of money worth about three months’ worth of emergency expenses.

Then, if you’re saving for something specific that will require money over the next five to 10 years, you’ll probably need to do it in cash.

But anything you won’t need to touch for longer than that is something you should consider investing in. Interest on savings has compared favorably to returns on investments in recent months because interest rates have been so high – but this won’t last forever.

Figures from Hargreaves Lansdown show that high earners in particular have saved more than enough money and could therefore consider investing.

A whopping 96 percent of the top fifth of earners have three months’ worth of expenses saved. They now have just over £16,500 in their current account, £31,000 in savings accounts and will have £750 left at the end of the month. If that £750 were paid into stocks and shares Isa every month and grew at 5 per cent for 20 years, Hargreaves Lansdown calculates it could create a savings pot of £308,275, which could be withdrawn tax-free.

Sarah Coles, head of personal finance, says: ‘If you have regularly stopped investing during tougher times, you should think about the possibility of getting back into investing.’

4. Don’t forget to increase your pension

When managing your finances in the present is difficult enough, it’s easy to let long-term retirement savings fall by the wayside.

But if you do get a bonus or pay increase, it may be a good time to think about increasing your premiums. The number of people receiving a bonus has almost doubled in the past six months, from 12 to 20 percent, according to Aldermore.

If you were lucky enough to have an extra income of £750 a month and put it into a pension where it benefited from tax relief, you could build up a pot worth £385,344 in just 20 years, according to Hargreaves Landown. This assumes that your investments grow by 5 percent per year.

5. Buy a brolly for a rainy day

As the financial outlook improves, keep an eye on the storm cloud in the distance and prepare as best you can.

It is almost impossible to predict when it will arrive and what will cause it. For example, few experts saw this crisis in the cost of living coming, caused by, among other things, the war in Ukraine and a global pandemic.

If you feel the pressure easing, consider strengthening your financial fortress now by paying off debt where possible, building a rainy day fund, and making the most of your savings.

After an endless cost of living crisis, green shoots are finally emerging. So with inflation falling and wage growth higher than expected…