For most of us, putting aside a fixed amount of perfectly good money each month is hard work, but the fact is you can save, even if it’s only a small amount. No matter what your age, gender, race or professional status, you should think of saving as a fixed monthly expense, a regular part of your budget, just like your car or mortgage payments. As a rule, you should aim to save at least 5 to 10 percent of your pay each month.
Six Simple Saving Schemes
- Think of saving as fixed monthly expense. Saving is something you must do, like paying your mortgage, even if it’s only a small amount every month. While there is no magical number for how much you should save, 10 per cent of your monthly income is a realistic amount aim for. If you manage to save more than that, all better. Some financial professionals recommend that you put 10 per cent a month into your retirement scheme alone, and another 5 per cent into a savings account.
- Use the money in your current account to pay your daily living expenses, and keep the money in your savings account sacrosanct. You should aim to build up a cushion of no less than three month’s income in your savings account, for emergencies.
- To make savings enrol in a savings plan that automatically deducts money (the amount is determined by you) from your current account each month. That way you won’t be tempted to spend it.
- Don’t save your hard-earned money under the mattress where a mouse or burglar might find it; instead, invest in a pension scheme such as the state-sponsored individual Savings Accounts. Inaugurated in April 1999 (they replace TESSAs and PEPs), ISAs allow you to put money away for the future on a tax-free basis.
- Invest in a money market funds pay a higher interest rate. Nearly as safe as a bank’s saving account, these funds pay a higher interest rate. You can buy a money market fund through a unit trust company, a brokerage firm or a bank. And you can have money automatically drawn from your pay cheque and placed in the fund before you get your hands on it.
- Set a savings target for the year – 10 per cent of your annual income, at a minimum – to give yourself something to aim for. If you reach your goal early, treat yourself. Spend the equivalent of what you put away each month – new (not saved) money – on something you really want; it’s a treat that you have earned. If you don’t achieve your goal early.
Deposit Savings
At the heart of everybody’s savings portfolio should be money left on deposit – with a bank, building society or one of the new deposit takers. Deposit savings should be the first home you look for when you decide to start saving – maybe so you can amass a deposit for a new home or simply save for the future.
However, choosing a savings account is no longer as simple as it used to be. Choice, as in most spheres of personal finance, is greater than ever before with more providers vying for your money.
This in turn has led to the development of a whole range of different savings accounts with different terms and conditions. Unless you tread carefully, you can end up with an account which will cause you more misery than joy.