Smart tactics to boost saving day to day – for the long term

Small changes can have big consequences for your finances and squirrelling away a little money here and there can eventually add up to large amounts. It’s always more tempting to spend rather than save, but seeing how small savings made from day to day can build up over the long term may provide an incentive to get into the habit of putting money aside. Here are six ideas to consider.

Track your spending

Personal finance apps make it far easier to monitor your day-to-day spending. They can keep note of recent transactions, provide a status report on your monthly budget, manage subscriptions and know when tax needs to be paid. They can examine your spending trends and help you understand where your money is going.

Some apps will even put your spare cash to work by sweeping small sums into a savings or investment account. They round up every purchase you make to the nearest euro and automatically put the additional cents into a cash account or investment portfolio.

If these small deductions help to save as much as €200 a month, invested at 3% a year this would build up a total of around €65,800 over 20 years, perhaps enabling you to retire a little earlier, or make a purchase that would otherwise have been out of reach.

Depending on the mechanics of the scheme and the length of time you are a member, it could make the eventual payout worth double the amount you put in.

Take advantage of your employer’s retirement scheme

This really can be free money. Some employers offer access to a pension scheme into which both you and the company make contributions, and which often benefit from tax incentives, boosting the value of all the contributions you make. Depending on the mechanics of the scheme and the length of time you are a member, it could make the eventual payout worth double the amount you put in.

Company pension schemes, like other investment strategies, offer the benefit of compounding – €100 invested at the age of 20, growing at a compound annual rate of 3%, would be worth €331.50 at the age of 60, whereas €100 invested at 40 would be worth just €182 two decades later. The later you leave it to join an employer’s scheme, the more you would need to invest to build up a comfortable retirement income.

Check the interest you’re repaying on a home loan

The gap between home loans at a fixed interest rate and a lender’s variable rate can be substantial – and the surge in inflation and interest rates in 2022 and 2023 has made the issue of choosing the right option even more important.

At the end of 2021, borrowers in some countries could obtain interest rates fixed for a certain period – usually up to five years, but in Luxembourg it can exceed 10 – of as little as at 1.8%, whereas a lender’s standard variable rate could exceed 4.5%.

Much has changed since then. The average variable home loan interest rate in Luxembourg has been declining since early 2024 and stood at 4.49% in July of that year, while the average fixed interest rate on loans of between one and five years was 3.84%. With inflation in the past few years having overturned decades-long assumptions about the long-term level of interest rates, it’s more important than ever to ensure you are not paying more than is necessary.

Exploiting sales opportunities

Big-ticket purchases are seldom time-sensitive. You can live with an old, threadbare sofa for a little longer, or hold off on new kitchen appliances. There are significant savings to be made by waiting until items are on sale at various times during the year. The timing of sales is predictable – they generally take place after Christmas or at the start of the new year, as well as during the summer.

At any time of year, it pays to be a savvy buyer. The internet has made it far easier to find the best price for individual expensive goods such as TVs, computers, furniture and domestic appliances including washing machines and cookers.

It stands to reason that stores will hike up prices for winter clothes ahead of the Christmas season, or swimsuits in the summer; it’s usually cheaper to buy when demand is lower and businesses are trying to reduce stocks.

It is always worth buying items out of season, where possible. It stands to reason that stores will hike up prices for winter clothes ahead of the Christmas season, or swimsuits in the summer; it’s usually cheaper to buy when demand is lower and businesses are trying to reduce stocks.

Avoiding impulse buys

Online shopping can also be the enemy of good financial habits, however. It is all too easy to buy without giving the decision sufficient thought, or because you’ve had a bad day. Where possible, impose a delay of 48 hours on yourself before you take the final decision to purchase. That will give you a chance to reflect on whether you really need the item, or whether it would be better to delay until better offers are available, or indeed to save your money altogether.

Financial experts also recommend declining to store your payment card details on computers or other devices. While it may be more efficient to do so, it makes it very much easier and quicker to spend money. The more time you have to think about a purchase, the better.

Monitor your direct debits and subscriptions

Direct debits may be a convenient way to pay, but they can linger on long past the usefulness of the service they buy. For example, you may still be paying for insurance on mobile phones that were upgraded long ago, or retain subscriptions for services or publications you no longer use.

The outlay may be as little as €10 or €20 a month here and there, but it adds up to money that could be put to better use. Even €50 a month could help create a useful volume of savings if left to accumulate for long enough.

Most banks allow customers to check the list of direct debits coming out of your account, so make sure to cancel any that are paying for something you no longer use or need. This can be a tedious process, but looking back at the amount of money wasted over the preceding couple of years may help galvanise you into action and ensure you remain vigilant in the future.

Building wealth is all about developing good financial habits. As you start to see your savings increase, it can be a powerful motivator to take further steps. It can take time to put these reflexes in place, but small steps can make a big difference in the long term.

It’s always more tempting to spend rather than save, but seeing how small savings can build up over the long term can be a powerful motivator to get the habit of putting money aside.