How much do you save?

By the end of the month, you transfer £250 to your savings account, have you actually saved £250?

If you answered yes, keep reading.

Spoiler alert: the correct answer is no.

Don’t worry, a LOT of other people have misconceptions about how much money they’re actually saving too. I want you to forget, for a moment, all of your concepts about saving and bear with me.

Let’s get started!

Moving money to a savings account is a zero-sum game

Simple example

Let’s say Bob has £500 in his current account and £1,000 in his savings account for a total of £1,500. Now he transfers £250 from his current account to his savings account. Is he £250 richer?

Obviously no, moving money across accounts is a zero-sum game.

You might say that Bob saved £250 that day, but his total net worth remains £1,500.

That was just a simple example so let’s look at a more realistic one involving spending with debit cards…

Realistic example

Imagine Bob:

• starts the month with £400 in the bank