Home > Savings insights > How to build savings on a low income

How to build savings on a low income

Written by Ines Pena, Digital Content Executive

When your income barely seems to cover your expenses, building a savings pot can seem like a pipe dream. But there are ways to save money on a tight budget.

Whether your income has recently changed, or you’ve been struggling for a while, when it’s difficult to pay for even your most basic needs, it can be tempting to give up on your financial goals.

But you don’t have to. We’ve put together a list of suggestions for small changes that can give you the freedom to build your savings even when you don’t have much money coming in.

Tip 1) Cut costs to free up more money to save

This one sounds obvious but it’s the most effective!

The first step to building your savings pot is working out what you have free to save and then finding ways to increase this. Here’s how you can do that.

Make a budget for a low income

When you’re looking to start building your savings, planning your budget is crucial.

Your budget should be realistic and honest, there’s no point denying some of the payments that you’re likely to make! Putting everything down on paper will help you be more aware of your finances.

If you’re not sure where to start, take a look at our detailed guide to writing a household budget. You could even consider using a budget rule to really get an oversight of what you’re spending and where you can cut costs – this is especially useful if you tend to have a lot of changing expenses.

Cut your spending

With your budget in front of you, you should be able to see any spending that falls into the “unnecessary” category.

Ask yourself what you can live without or just what you can simply reduce your spending on. For example, it might not be the right time to give up smoking but could you cut down? Could that Friday night meal out become a take away or even a special home-cooked meal? Do you need a subscription to Netflix and Amazon Prime?

Take on a “No Spend challenge”

To really speed up your cost-cutting, you could consider setting yourself a No Spend challenge or a No Buy challenge. This is a great way to find out how much money you could be saving by simply watching your spending.

When doing a No Spend or No Buy challenge, whether you do it for a week, a month or even a year, you set yourself the challenge of not spending any money that you don’t absolutely have to for that period of time.

This can be quite a hard challenge to stick to! To make it easier, you could make yourself a set of rules before you start. For example, you could make an exception for celebrations or for spending money on someone else.

The goal is to get you to appreciate and make use of what you already have, curb any impulsive shopping habits and, ultimately, help you save some money.

Then decide how much you can save regularly

Once you’ve cut your costs as much as you can, re-do your budget without those costs.

Does it look like you’ll have money left over at the end of the month? If so, that means you can start building up your savings.

It’s up to you how much of that money you want to put away for the future, but again, be realistic. You still want to be able to buy birthday presents and treat yourself once in a while!

Tip 2) Boost your income to give yourself more money to build your savings

If you've already cut your spending but you still want more money to save, then you probably need more money coming in!

This might seem hard to do if you’ve already got a busy life, but there are many ways to make some extra money without having to take on a regular commitment.

Check if there are any benefits you could be claiming

Most people know about Universal Credit, but you might be missing out on more help from the government, such as council tax reductions, support with mortgage payments, childcare support and more.

You can find a benefits calculator on the UK government website, which will tell you which benefits you’re entitled to and how much you could be getting from the government.

If you’re claiming benefits and still managing to put money in your savings, you could take advantage of top-ups from the government’s Help to Save scheme.

Look for ways you could boost your income at your current job

If you’re in part-time or full-time employment, there could be ways to boost your income in your current job.

  • Check if your work has any overtime opportunities available.
  • Speak with your manager about potentially getting a pay rise. If they feel you’re not quite there yet, they can at least guide you on how you can move up. Career website Indeed has a step-by-step guide on how to best ask your boss for a raise.
  • If you work a part-time or hourly job, check if there are more hours available for you to work. You could also ask any coworkers to keep you in mind for whenever they need someone to cover their shift.

Have a clear-out and sell what you’re not using

This could be anything from clothes to kitchen utensils to toys your children no longer play with.

You could try your luck at a car boot sale or a local market if you want to sell in person or sell online on Gumtree, Facebook Marketplace, Vinted, Depop or eBay.

Even if you sell your items for less than you paid for them, any money in your savings is better than none!

Take up a side hustle

A side hustle doesn’t have to be time consuming. Here are some things you could do with your free time to give yourself some more cash in your savings pot.

  • Make your own products and sell them online on websites such as Etsy or in person at local markets.
  • Take on quick freelance work through websites like Fiverr, where you can advertise your services on everything from web design to translation.
  • Take up food delivery for services like UberEats and Deliveroo in your area.
  • Do odd jobs for neighbours, friends and family. You could help them with their garden, help repair any issues in their homes or walk their dogs.

You might only take up a side hustle for a short amount of time to help get your savings started, but you could end up finding a new career!

Tip 3) Give yourself a clear aim to keep up your motivation

You don’t need to have a clear goal in mind to start saving, but it helps keep you motivated, even if your goal changes over time.

You might simply want to build an emergency fund to be better prepared for the future or you might be saving for something specific like a new car or to buy your own home. One of the most motivating goals can be saving for your children, to give them more opportunities when they reach adulthood.

Having a clear goal in mind will also make it easier to decide what kind of account to use for your savings, as well as give you an idea of how long you’ll have to save up for.

Stocks & Shares ISA

You can open a OneFamily Stocks & Shares ISA from as little as £25 a month. You have two fund options to choose from and you won’t pay tax on the money you withdraw.

Lifetime ISA

Open a OneFamily Lifetime ISA with as little as £25 a month and get a 25% government bonus on everything you invest, up to £4,000 each tax year, to help you buy your first home or save for retirement.

Junior ISA

Give your child a head start with a OneFamily Junior ISA. You can pay in as little as £10 a month and your child will get a lump sum when they turn 18.

Our Stocks & Shares ISA, Lifetime ISA and Junior ISA invest in stocks and shares. This means they have good long-term growth potential, but the value of your investments can go up or down and you or your child could get back less money than you’ve put in.

Please note that if you withdraw money from a Lifetime ISA before the age of 60 and not for the purchase of a first home, the full withdrawal will be subject to a 25% Government Withdrawal Charge.

You may also be interested in:

How to create a financial plan for your family

Long-term financial planning can help make the future a little easier for you and your family.

How to build an emergency fund

The best way to deal with the unexpected is to prepared for everything. Find out how much your emergency fund should be, how to build it and more.

What is emotional spending and how can you keep it in check?

Emotional spending can come from simple, spur-of-the-moment joy. Find out how to keep your spending in check.

How I saved an extra £154 using the Active Saving Method

A micro-saving method helped me to save more money without making huge sacrifices.