Representative Example: Representative 1286.98% APR on a loan of £300.00 with 5 monthly repayments of £101.03 Total amount repayable £505.13 Annual interest rate (fixed) 290%

Warning: Late repayment can cause you serious money problems - For help, go to moneyadviceservice.org.uk

This article is not intended to contain information about, or advertise, products offered by us but is intended to contain information, give opinions or discuss generally available products/services.

Author: Internal Customer Services Agent

Saving money for the future

I cannot stress enough just how important saving money for the future is. Whether it is just for you personally, or whether you have a family, money should be put aside for what the future could bring. Whether someone needs the money for a new car or perhaps they are looking for probably the most significant purchase of all, a new house, savings are an important first step. If they have money saved away already then they can put that money towards what they need. Some people may even have enough money saved to pay for their requirement outright, preventing the need to borrow money at all. If that is not the case, providing they have some savings, they can at least put some of the money towards their purchase which will reduce what they have to find from elsewhere.

Another significant step in people’s lives can be a wedding. Maybe someone is looking at a getting married and they need money for this. These are often expensive and although it can be tradition for the father of the bride to pay, that is not always the case. The couples getting married may need to put some money towards this and using savings is the ideal scenario as it means that money does not have to be borrowed. It is true in some cases that people borrow so much to pay for their wedding that they can be paying it back for years to come. It is much better to save for an event like this and then be able to pay for it outright.

Another good reason to save money is for those unexpected expenses. Many people, through choice or circumstance live with zero savings. I say ‘through choice or circumstance’ because some people will have the funds to save, but choose to spend it on non-essential and often luxurious purchases, whereas others would love to be able to save, but do not have the disposable income to do so. The problem with having zero savings is not only that you cannot afford the choice purchases such as the new car or wedding, but you cannot afford the more necessary purchases such as a new cooker, repairs to the central heating or the school trip to London. This means that when such eventualities occur, and the do occur to everyone from time to time, we have to start borrowing money. This not only costs us more in interest, but it has to be paid back which can affect further budgeting.  

My advice for a good way to start savings is to select an amount that is affordable and realistic for you to save each month. You can then use that figure as a target to try to save that amount each month to get the balance higher and higher. Some people clearly have larger financial means and will therefore be able to save more. Someone for example with a high paid job and limited financial commitments will certainly be able to save more than someone who does not work or someone who has limited income yet a large amount of bills to regularly pay. Saving something each week, month or year will always be better than saving nothing at all. People can then set up a separate savings account and can transfer money into it as soon as they have the required means to do so. If they need to use the money saved for a genuine reason they can transfer the money back, but then they should replace that money taken as soon as they can.

Now selecting the right savings account is something that needs consideration. Just like when borrowing money no one should ever then rush into this. Someone must explore the different options so they can choose the savings account that best suits them and their financial situation. I recently read a review from the Daily Mail that reviewed the 5 of the Cash ISA’s available that offered the best rates to their customers. This included the Post Office and the Tesco Bank ISA. These offer people the chance to have relatively easily accessible savings but can offer higher interest rates than some current accounts.

Having easy access to the account for some may be important, especially where disposable income is lower and it may be needed for an emergency. On the other hand a more affluent borrower may decide that tying up their savings in an account with say a 90 day notice period in return for a higher interest rate may be more suited to them. Some account offer things such as ‘Cashback’ on savings, while others may pay a small ‘bonus’ each month that there is a minimum balance in the account.

For those looking to save just a small amount, maybe the interest rate is not the driving factor. They may simply be looking for the second account as a way of segregating their savings ‘pot’ from their everyday bank account. Many high street banks will offer secondary accounts that can simply be added to their main bank account. Some of these may be ‘online’ accounts to that transferring money between them can be done very quickly.

A final thought - The type of account you choose is irrelevant if there is nothing in it. Even for those who think that they have nothing to save may, with a little lifestyle change, have a small amount to save. For example, do you regularly visit Starbuck’s for a coffee on the way to work, or buy sandwiches for lunch? Say these cost £3.00 per day (Monday to Friday), that is £15.00 per week, £60.00 per month, or a whopping £720.00 PER YEAR…Is that not worth making an instant coffee before you leave, or taking sandwiches that you have made at home for a fraction of the cost? This £720 per year is quite a savings pot, whether it be for the emergency or the larger purchase.

free business advertising  free business advertising