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Four New Year financial resolutions for 2022

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A new year means a clean slate and, for many, this also presents the opportunity to make new financial commitments. Against the backdrop of what has been two unusual years (to say the least!), 2022 might turn out to be a year where more careful financial planning is needed than usual.  

With spiralling inflation and rising fuel and energy costs scheduled to potentially continue throughout the year, it’s important to start this period on the right footing.  

We’ve looked at four financial resolutions for the New Year that you can consider to ensure you’re prepared for any eventualities this year.   

Protecting your nest egg  

A recent piece of research we conducted showed that 17% of people have already had to dip into savings in order to meet rising expenses.  

In 2022, many more Brits will be withdrawing money from their emergency fund as they adjust to higher costs of living or support loved ones and dependents that may be struggling. To prepare for this eventuality, it’s important to make a plan.  

You will need to consider how much you are likely to withdraw from your nest egg, and think about the best way to replace those funds later down the line.  

It’s also key to ensure you are receiving a competitive rate on your emergency fund. Our research shows that more than seven in ten instant access balances are receiving a rate of 0.1% or under, so it’s very important to shop around for a better deal if your emergency fund isn’t paying a competitive rate.  

Do an audit and forecast of your expenses  

The New Year offers a good opportunity to reflect on last year’s spending and consider how outgoings are likely to change in the year ahead. 

Take some time to review your 2021 outgoings – either via your bank app or your current banking statement of account – and look at what stands out in your spending. Highlight what can be cut out or cut back and consider if some patterns were impacted by the pandemic and are likely to change this year.  

As a next step, you can then create a forecast of expenses and spending for 2022. Start by looking at big expenses planned – are you looking to go on holiday this year? Or pay for renovations on the house? Once you’ve accounted for those big bill items, it’s a good idea to consider how rising costs will impact you and include those in your forecast.  

Research from Oxford Economics recently estimated that costs could rise by up to £1,566 a year, with high earners worst impacted, so it’s important to schedule this into a forecast for the year ahead.  

Do an interest rate audit  

It’s important for you to ensure you’re receiving a competitive rate of interest on all of your savings.  

Typically, popular high street banks tend to offer lower interest rates on savings, whereas smaller, more specialised providers offer more competitive interest rates.  

Consumers will often open a savings account with the same bank they hold a current account with more so out of convenience than because they are receiving a good rate, so it’s important for savers to consider if they could maximise interest by looking elsewhere and choosing a best-buy account. 

See if it makes sense to fix  

One of the best way to future-proof your savings against rising costs is the lock your money away in a fixed rate product, in order to ensure it’s receiving the best rate available.  

Once you’ve established how much you need to keep available in your easy access emergency fund to ensure you’re ready for all eventualities, it’s worth considering if you want to lock the rest away.  

Our research shows that around 2% of all non-ISA easy access accounts hold a balance of £100,000 or more – it’s fair to say that at least some of those funds would be producing a better return in a fixed rate account.  

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*AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded on an annual basis.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551