How to learn to save

Saving isn't always as simple as it seems. Although the theory is known to everyone, reality shows that many Spaniards find it difficult to save. According to INE data, we only save €6.5 of every €100 that makes it into our bank accounts. If you want to increase this percentage, here are some tips on how to save in your daily life.

Learning how to save requires turning saving into second nature. You can try to cut costs and set aside some of your money for the future, but if these actions are the exception and not the rule, you won't achieve any long-term results. If nothing else, remember this: the key to long-term success is periodic savings. Small amounts saved and properly invested on a recurring basis work miracles in the long run.

The key to saving money every day is organization and planning. If you have a procedure or plan, you will gradually begin to internalize it and save intuitively. In order to create this plan and set realistic goals, it's essential that the saver first analyze their financial situation, expenses and income.

There are several useful techniques for setting up a savings plan. One of the most common is the 50/30/20 formula, which divides income into three groups intended for different purposes. Thus, 50% of all income should be allocated to cover the user's basic needs, such as bills and food; 30% can be allocated to expenses that are useful to the consumer but not essential, such as leisure or travel; and, finally, 20% is reserved in advance as monthly savings.

Another good tip is to change your understanding of savings. We tend to save what we have left over after deducting expenses from income, when we should actually spend what is left over after subtracting from our income the essential savings that will cover future needs.

There are also other, more obvious or simpler techniques, such as cutting costs and spending smart. Lowering expenses is related to consumption, since the simplest way to cut down on spending or purchases is to decrease the number of goods or services purchased. Things as simple as turning off appliances or lights when they're not being used can have a significant effect. Similarly, measures such as dispensing with luxuries and not buying anything that's not really necessary can go a long way to boosting your savings.

In the case of truly necessary goods or services, it pays to be a smart consumer. For example, you can compare prices and take advantage of deals to make sure you pay the lowest price on every purchase. Another beneficial measure is to prepare a list before making any purchase. This way, expenses are planned and purchases don't result in improvisation or in the consumer being guided by their impulses or desires.

Just like planning helps us get into the habit of saving, so recording every expense helps us evaluate the progress made and identify weaknesses and areas to improve. We make small purchases every day that often go unnoticed but that affect how much we save. Keeping a record of every expense, no matter how seemingly insignificant, helps make you truly aware of your consumption habits and how to change them.

There are several mobile apps that make it easy to keep such a record, although you just need to enter this information regularly in an Excel table or in a notebook. This task is also simplified if credit and debit cards are used to make payments, since they are all reflected in the bank account.

Setting aside resources for the future and cutting costs isn't enough in every case, but there are financial products that let you get more from your savings. It's true that some of these products can involve risks, although it's always possible to select those that offer the best assurances, such as deposits, long-term savings plans, pension plans and investment funds. In any case, the risk is not a problem in the case of a long-term or very long-term investment, since a prolonged time horizon can absorb market swings.

Deposits act as bank accounts that yield interest. The returns on these products are determined by the annual percentage rate (APR), which is guaranteed as long as the user complies with the term and conditions of the deposit.

Long-term savings plans are similar, although their conditions are generally common to all banks. These plans have a 5-year timeline, during which the investor can contribute up to €5,000 a year. If these conditions are met, the investor is guaranteed to get at least 85% of their investment at maturity, and any resulting capital gain is tax-exempt. If the money is taken out before this period, any capital gains will be taxed. There are two types: the Individual Long-Term Savings Account (CIALP) and Individual Long-Term Savings Insurance (SIALP).

Pension plans are a long-term savings vehicle specifically designed to set aside money for retirement. The amount contributed, up to 8,000 euros a year, can be deducted from the taxable income on the annual tax return, leading to considerable tax savings that, ideally, would be reinvested in the plan. Liquidity is restricted to certain situations, such as retirement, long-term unemployment or disability, although starting January 1, 2025, it will be possible to withdraw contributions that are at least 10 years old.

Finally, investment funds are very popular investment vehicles due to the wide range of solutions they offer investors of any risk profile, their favorable taxation and their simplicity. With funds, investment decisions are also delegated to financial professionals.

At BBVA, we have a wide range of savings and investment products. You can choose the product that best suits your profile and get the highest possible returns from your savings. Visit bbva.es or any of our branches to get more information and advice and start saving today.