4 new ways you could boost your saving returns

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Paying spare cash into a savings account is probably something you’ve been doing for a long time – perhaps having money available in the event of an emergency or just bringing in an additional income.

But while saving is straightforward, the willpower and discipline needed to put away more cash for an unknown future, instead of spending it on something altogether more enjoyable now, can be hard to come by.

One way to get the best return possible is regularly moving your money for the most productive interest rate, but it also requires a fair bit of effort.

However, in recent years there’s been a lot of innovation in the savings industry to not only make it easier and more enjoyable to save, but also to increase returns.

Andrew Hagger, independent savings researcher and expert, says: “Saving or putting money aside is something we all know we should do, but getting started or getting round to it is another matter – it’s something that’s easy to put off until another day.

"These new savings innovations make adopting a meaningful and regular savings habit much easier and increasing balances more visible.

“By overcoming traditional psychological barriers to saving hopefully more people [will save] on a regular basis rather than simply relying on expensive credit to pay for unexpected emergencies.”

1. Automated saving

You might think that automated saving is nothing new – you may well have had a standing order for years that siphons money into a savings account as soon as your salary or pension comes in.

However, there’s a growing number of apps that will automate your saving in a more sophisticated way, which means they’ll move the money for you based on a wider variety of situations.

Through a combination of open-banking (which lets you give another provider access to your chosen bank account) and artificial intelligence (AI), new app-based banks can monitor your spending – and set savings limits – in a more intuitive way.

Hagger says: “These state-of-the-art apps can calculate how much you can save each month, and automatically build your savings for you based on your parameters.”

Approaches vary between apps, with most letting you decide how cautious or aggressive you want your saving to be, but some let you set your own rules.

Plum, for example, injects a sense of fun with some of its quirkier offerings.

Its ‘Rainy Day’ setting, for example, makes a payment into your linked savings account every time it rains where you live, while its ‘Naughty Rule’ will pay money in every time you shop at one of your chosen ‘naughty’ retailers.

Like other apps, there is a fee for this service, so always check first and consider whether you think it’s worth the cost.

Autosaving can be great way of increasing your savings balance and there are usually plenty of controls to ensure an over-eager algorithm doesn’t send you into the red.

That doesn’t mean you shouldn’t stay vigilant over how they’re working though, and it’s important to check the protection of your money.

In some cases, your money will be protected by the Financial Services Compensation Scheme (up to an £85,000 limit), as it would with a traditional bank.

However, some will use an ‘electronic money’ licence, and it’s important to know the difference before you sign up.

This means your cash will be held in a ring-fenced account, so it’s protected in the event of the digital bank going out of business. However, you may not get all your money back as other costs are taken too, and it will take longer to recover what's lost.

Also consider that as this money isn’t considered as cash on deposit, if the bank holding it went bust, it might not be protected by the FSCS.

Another thing to consider: while some autosave apps might give you a choice of savings accounts to pay your money into, you may not get a market-leading rate.

In that case it might be a good idea to regularly move money out of your autosave account into one that pays more interest.

Hagger adds: “These fully automated savings apps may be a step too far for some people right now, however AI is increasingly impacting many aspects of our lives and in a couple of years this type of automated financial assistance could become the norm.”

2. Rounding up

Rounding up could be a more palatable form of auto-saving for those who aren’t quite ready to give full control of their saving to a machine.

Hagger explains: “[Rounding up] is where you set your current account (via your banking app) so that when you spend on your debit card the transaction is rounded up to the nearest pound and the difference is credited to your savings.

“Say you purchase coffee for £2.40, the transaction will be rounded up to £3.00 with the 60 pence difference automatically being credited to your chosen savings account.”

Some banks offer more control over rounding up – such as doubling the amount you save – although these can be limited to paid-for accounts. Other cards from different financial institutions sometimes have round-up options too, so it’s worth looking at what’s on offer.

Dr Janina Steinmetz, Reader in Marketing at Bayes Business School, says rounding up can be a really easy way to boost your savings balance.

“The consumer doesn't usually notice a difference, but the many small rounded up purchases can add up at the end. The consumer doesn't even have to interact much with technology, because autosave can be set up once and then runs by itself, so the effort is minimal, but the effects can be great.”

However, it might not be an entirely ‘hands-free’ system if you want to get the best returns from your money.

For example, if the account isn’t paying a particularly competitive interest rate, you might want to sweep the money into a higher-paying account occasionally.

Also, if you’re making lots of debit card transactions, you should monitor your account carefully to ensure rounding up doesn’t wipe out your current account balance.

3. Savings pots

Savers have long been using pots – or stuffing envelopes – to squirrel away cash that they’re saving towards a particular goal. However, you no longer need to rely on hiding your Christmas cash or holiday fund about the house.

The new 'virtual pots’ method is where banks allow you to pay money instantly in and out of individual spaces within your account. You might have one to save for a big birthday, one for a holiday and another that you dip into if there’s an emergency.

Hagger says: “It’s a great way to separate your money out into a pot, or pots, rather than keep everything in a single account – this way you can see immediately how you’re progressing against your savings targets.”

Savings pots are offered by a range of high street banks, as well as the newer ‘challenger’ banks. The catch is that you’re unlikely to get a market-leading rate of interest on your cash, so they’re more useful if you only want to save for short-term financial goals.

Close up of mobile phone in hand of a businessman with coffee on cafe table. Senior businessman using smartphone at coffee shop. — Shutterstock / Jacob Lund

Could a badge really help you save more money?

Research by academics at Bayes Business School has suggested that ‘gamifying’ saving – and introducing an element of competition – could encourage people to save for the future.

The study asked 331 people in the UK to set a savings target for the next month and track their progress using different versions of a savings app.

The half of the participants that used the gamified app saved close to 20% more than the half that used the non-gamified version.

It suggested, as a result, that app-based banks could encourage savers further by introducing gamification to their proposition, although further, long-term tests would be needed to see if this behaviour maintains.

Dr Janina Steinmetz, one of the authors of the study, says: “Saving in itself is not really fun, because we have to forgo something we would want right now (e.g. a fun purchase) for a very abstract future reward – namely money in a bank account.

“In general people struggle with such trade-offs because concrete pleasure in the here and now is much more motivating to pursue than abstract rewards in the far-away future.

"Here is where gamification can help, because it adds small pleasures to saving right now. If consumers get points, badges, or other little gamified rewards for saving, this is a more tangible reward than the abstract money that will be there in future.”

While the language learning app Duolingo, as well as several exercise apps, rely heavily on gamification to spur their users on, it’s yet to make a big impact in the world of personal finance, with only a handful of services offering things like ‘challenges’ to entice new methods of saving.

4. Savings platforms

If you want to get a better return on your savings but are put off by the thought of continually moving your money between banks to chase the best rates, it might be worth exploring savings or cash platforms.

This is especially true if you’re one of many savers who has thousands in their current account, earning little to no interest.

Anna Bowes, co-founder of Savings Champion, says: “A cash platform is best described as a ‘savings supermarket’, where you apply once to open your account and when 'onboarded’ you can move your money between multiple accounts and providers (dependant on who is on the platform at that time) so your money shouldn’t remain idle.”

The idea is that this makes it easier for you to actively manage a portfolio of different savings accounts, helping you to improve the rate of return you see on your money.

They’ll likely also offer a central ‘hub account’ where your money sits when it’s between homes.

Bowes adds: “With a cash platform, you can [simply] switch when a new, improved account comes along or when your bond matures, without the need to fill in another application, [get] a new login and/or password to remember and more security questions and ID checks to fulfil. You apply once and the rest is history, so to speak.”

If your savings platform does use a ‘hub’ approach, check your money is held with a registered bank – using the Financial Services Register - and is covered by the FSCS for protection if the financial institution in question fails.

It’s also important to understand that while savings platforms work with multiple partner banks - and may sometimes have exclusive rates - they also may not offer access to all savings accounts available on the market.

Alice Haine, Personal Finance Analyst at investment platform Bestinvest, told us previously: “You might not always get offered the best rates possible as the platform may take a cut of the partner banks’ rates. This means a saver might get a better rate if they went to the provider directly.”

You should also check whether the platform has service charges for use, or minimum deposit limits before you can start saving, and consider these elements against any convenience this way of saving might bring.