Many people are rethinking their household budgets as the cost-of-living bites. But with everything from essentials to special treats going up in price, it’s not always easy to choose what to prioritise and why.

And if you’re saving for the future, you also need to think about how to balance your current needs with your longer-term goals.

Arguably, you might need to save more if your end goal is likely to cost more in future.

But that might not be realistic with a tighter budget. So, instead, you might be thinking more about cutting your monthly investment contribution. 

Before you jump into action, though, consider the options you have:

  1. It might not be possible for everyone, but see whether you can reduce your spending, rather than your savings
  2. If you do need to cut your savings, plan how to rebuild them.
  3. And if you lower your savings, also consider adjusting your goals

Once you’ve thought about the pros and cons of each option, you can make the right decision for you.

The benefits of regular saving 

Many people choose to set aside a fixed amount each month, investing via direct debit into a tax-efficient account like an individual savings account (ISA) or self-invested personal pension (SIPP). 

The advantage of this approach is that you don’t need to think about it each month. There’s also no risk that you’ll forget to put aside money from your salary. 

Making a regular monthly payment to your investments can help them grow into a sizeable sum over the long term. 

Our chart below shows the difference between investing a lump sum with monthly contributions of £100 and just investing a lump sum. Both hypothetical scenarios assume you invest £10,000 at the start, with your investment growing at 5.5% per annum over 10 years after costs.  

The difference a regular investment plan can make

Notes: This hypothetical scenario is for illustration purposes only and doesn’t represent a particular investment or its expected returns. Monthly returns are assumed to be the geometric averages of these values (the average of a set of values, calculated using the product of the values rather than the sum). Contributions are monthly and are made at the end of each period. Balances reflect the value at the end of each period. 

Source: Vanguard, July 2023.

Cut spending rather than savings first

Given the long-term power of regular payments, as shown above, it makes sense to reduce your spending before your savings. 

This is even more the case if you are saving for a long-term goal such as retirement. £100 saved today can grow to almost £500 in 30 years’ time, assuming investment growth of 5.5% a year. 

The first step to reduce your spending is to work out where you are spending money. 

According to a survey from the ONS, conducted between April 2021 and March 2022, the average household spends just under £530 each week1. But given the impact of inflation recently, that figure is likely closer to £600 now.  

You might be able to cut back in certain areas, like switching to a different energy provider, or find ways to save money such as cancelling a subscription that you no longer use.   

If the idea of cutting back on current expenditure fills you with dread, try to focus on what you’re investing for. Refocusing on the future goal can help you to see the value of sacrificing something in the short term.  

Could you have a plan to build back savings?

Of course, you might decide that you can’t avoid cutting back your savings. If that’s the case, you can always put together a plan to catch up later and keep yourself on track to meet your goals.

Double check that you have enough emergency savings first. We would suggest emergency savings for one-off expenses of £2,000, or half a month’s expenses. 

If you want to guard against a shock to your income, like being made redundant, you want something like 3-6 months’ expenses in an accessible account. You can find more information in our ‘Prepare for the unexpected’ article.

When it comes to planning how to rebuild your savings, you might decide to prioritise restarting your monthly contributions if you get a pay rise, for example. Alternatively, you might invest any bonuses to help you catch up on missed contributions. 

If you’re saving for retirement, you might also be able to take advantage of a salary sacrifice scheme, where your bonus is paid directly into a pension, reducing the amount you have to pay in income tax and national insurance. 

Our chart below shows how you might make up missed contributions. We’ve assumed that someone starts with a £10,000 lump sum investment and then puts in £100 a month, stopping regular contributions between years five and seven. 

Once they restart their savings, they increase the monthly contribution to £137.50 per month, allowing them to catch up. 

How your investments can catch up after a pause 

Source: Vanguard calculations. We have assumed investment growth of 5.5% per annum after costs, with contributions paused between years 5 and 7.  

There are other ways to give yourself more time to reach your goals, such as contributing for longer instead of at a higher rate and allowing more time for your investments to grow.  

Lower your savings, adjust your goals

It’s not necessarily a bad thing to lower your savings – you just need to adjust your goals in line with any changes you make. 

Your financial wellbeing is built on matching what you have with what you want to do. If you’re saving for a wedding, for example, you might decide to make changes to your big day. If you’re saving for retirement, you might delay your retirement date rather than save less in total. 


The decision to cut back on your savings is one that only you can make. 

Hopefully, we’ve explained the pros and cons with the three options above, and you’re now in a better position to make the right choice for you. 

It ultimately comes down to the reasons you’re investing in the first place. There is no right or wrong answer, so long as you understand the impact of each choice on your financial wellbeing. 

For more on financial wellbeing, visit our recent series, where you can learn more about how to take control of your finances, prepare for the unexpected and meet your long-term goals. 


Office for National Statistics, Family spending in the UK, May 2023 

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

The eligibility to invest in either ISA or Junior ISA depends on individual circumstances and all tax rules may change in future.

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Important information

If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described in this document, please contact your financial adviser.

This document is designed for use by, and is directed only at, persons resident in the UK.

The information contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so.  The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions.

Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.

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