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Savings Guide
Savings - Getting into the habit
Updated: Monday 6 June, 2011
By Hazel Cottrell - news@consumerchoices.co.uk
Want to get into the savings habit but don’t know how to start? We show you the best way to save, whatever your money personality.
The idea of saving can seem like a chore, and the facts bear this out. Worryingly, some 20% of Brits admit to having no savings at all and have no intention to start saving, according to a Mintel survey conducted in February 2011.
However, once you get into the savings habit, it becomes easy and can be very rewarding: making a little effort to save now could have a dramatic effect on your future and, in the current uncertain economic times, is certainly a prudent move.
Whether you want to save up for something special, like a wedding or new car, or whether you just want the security of knowing you’ve got a rainy day fund to call upon in emergencies, the key to saving is finding a style that suits you.
There are lots of different ways to get into the savings habit, and different methods will suit different people. So check out our guide to savings personalities, and start saving today.
- The brand new saver
- The forgetful saver
- The anti-saver
- The worried saver
- The big spender
- The newly escaped debtor
- The younger saver
- The older saver
- Living the savings dream
The brand new saver
Money personality -You are just starting to build up your nest egg and want to get the best returns on your hard earned cash.
Savings solution - For new savers, cash ISAs should be the first destination for cash. While the interest you get on standard savings accounts is taxed at 20% (or 40% if you are a higher-rate tax-payer), any interest you receive on a cash ISA comes to you completely tax-free. You can save up to £5,340 in a cash ISA this tax year (2011/2012) and you should try to use as much of your allowance as you can as it doesn’t roll over to the next. Look for an ISA offering a high interest rate that doesn’t require a bulky initial investment.
The forgetful saver
Money personality - You keep meaning to save but the idea always seems to slip your mind when you’re at the bank.
Savings solution - Set up a standing order to transfer cash from your current account to your savings account each month. That way you can save regularly without even having to think about it. If you can commit to saving a set amount each month, you should check out regular savings accounts as they offer some of the best interest rates on the market in exchange for your commitment to deposit money regularly.
The anti-saver
Money personality - You would like to have savings but hate the idea of having to give up big chunks of cash to put in your savings account.
Savings solution - Why not try one of the new painless ways to save banks are offering? Several current accounts, for example the 1st Account from First Direct (www.firstdirect.com), now offer a “sweeping” facility, which lets you automatically sweep unspent money (above an amount set by you) into your savings account at the end of every month. Or, even less painless, is the “save the change” scheme from Lloyds TSB (www.lloydstsb.com). Sign-up and every time you use your Lloyds TSB Visa card, the amount will be rounded up to the nearest pound and the difference will be transferred to your savings account. Alternatively you could start your own change jar, into which you empty your loose change every day or week. With techniques like these, you will hardly even notice you are saving, but the pennies will soon add up to a tidy sum.
The worried saver
Money personality - Having instant access to your cash, in case of an emergency, is very important to you. You don’t like the thought of locking your savings away and tend to keep all your cash in your current account (where it is likely to be earning a pitiful rate).
Savings solution - These days, there are plenty of instant access savings accounts to choose from, which are likely to offer you much better interest rates than your current account, as well as giving you access to your cash when you want it. Compare instant access savings accounts now. If you are worried about your bank collapsing, you should check out our guide to safe savings, to make sure your cash is protected.
The big spender
Money personality - However much cash you have, you spend it. You always splash out on payday and tend to have cleared your account by the end of the month.
Savings solution - Try to save some money as soon as your salary goes into your account. When you go to check your balance on payday, transfer a set amount to your savings. This means you can be happy knowing that you have done your saving for the month, and if you can’t see the cash in your account, you won’t spend it. Like forgetful savers, you too could benefit from a regular savings account.
The newly escaped debtor
Money personality - You have finally cleared all your debts and now want to start saving for your future.
Savings solution - First things first: Congratulations. Clearing debts can be a difficult journey and you have successfully reached the end. As you are likely to be accustomed to paying out money from your income each month now's a great time to start saving. Why not transfer the same amount (that you used to make in repayments) into your savings account each month. That way, you shouldn’t notice the difference, and if your debts were reasonably big, you will build up an impressive savings pot in no time.
The younger saver
Money personality - You are under 16 and ready to become a super saver.
Savings solution - It’s fantastic that you are eager to start saving now - the earlier you start, the bigger nest egg you can build up for your future. Plus, there are some great deals available exclusively for young savers so look out for special under-16 offers. Most children’s accounts will require an adult to manage the account on your behalf. Once you are 16 you can open a cash ISA, which will usually be your best bet for the greatest returns.
The older saver
Money personality - You are over 60 and ready to put more aside.
Savings solution - It’s never too late to start saving. If you receive a pension you could try setting aside a portion of this each week. There are savings accounts designed specifically for the over 60s but you should always compare the rates with those on standard savings accounts, as they will not necessarily offer the best deal.
Living the savings dream
Once you have found the savings style that suits you, you will soon find that it becomes easy and painless. Setting yourself a target is a great way to get motivated, and giving yourself a little treat when you reach your target will certainly sweeten the process.
Whatever type of savings account you choose, be sure to keep an eye on the interest rate you are receiving and if it becomes uncompetitive, don’t be afraid to switch.