Saving a small amount of money each month is a good idea and it is surprising how quickly your savings can build up.
It is important to find the best kind of savings scheme that suits your circumstances
Pay off your debts first
Before you open a savings account, you should try to pay off any credit cards or loan debt you have. This is because the interest rate you pay on any debts you have will usually be higher than the interest rate you get on any savings.
Help to Save
Help to Save is a type of savings account. It allows certain people entitled to Working Tax Credit or receiving Universal Credit to get a bonus of 50p for every £1 they save over 4 years.
You get bonuses at the end of the second and fourth years. They're based on how much you've saved. You can save up to £50 each calendar month.
Help to Save is backed by the government so all savings in the scheme are secure.
You can pay money into your Help to Save account by debit card, standing order or bank transfer. You do not have to pay money in every calendar month. You can pay in as many times as you like, but the most you can pay in each calendar month is £50.
You can only withdraw money from your Help to Save account to your bank account.
After 4 years your Help to Save account will be closed. You will not be able to reopen it or open another Help to Save account. You'll be able to keep the money from your account.
You can close your account at any time. If you close your account early you'll miss your next bonus and you will not be able to open another one.
Open an individual savings account (ISA)
Individual Savings Accounts are often called ISAs. You can save money in them or use them to invest in shares. Most people use them to save money in; they are just like a normal savings account, but tax-free. The ISA allowance is currently £5,640 a year for cash savings
Open a regular savings accounts
If you have reached the ISA limit for the year and still want to set aside money each month you could consider opening a regular savings account. As the name suggests, you have to make a set monthly payment into the account.
These accounts are different to ISAs because you may have to pay tax on any interest that you earn. With a regular savings account you cannot just deposit a lump sum.
Many banks and building societies offer regular savings accounts. However, the interest rate will vary between them. In general, you should pick the bank or building society that offers the highest rate of interest, as you will earn more money in interest
Join a Credit Union, they are independently-run local co-operative organisations that offer access to, savings accounts, loans, current accounts and payment cards, and budgeting advice. Credit Unions are monitored by the Financial Services Authority.
You can start saving from as little as £1. Deposits can be made at any local collection point by cash or cheque. You can even set up a standing order to make regular payments to your savings account, direct from your bank account. Depending on your employer you may even be able to join a pay roll deduction scheme where the money is taken straight from your wages.
Insurance is important to help with unexpected events.
Did you know Gentoo, Age UK and others do household insurance that starts from less than £1 a week?
Shop around for insurance by using comparison websites. when you are happy with the quote, ring the company and check all the details are correct. Ask them if they can do any better, you may be surprised.
It is also worth looking at the cover in terms of the excess.
This insurance would pay for your belongings to be replaced should your home be burgled, flooded or if you had a serious fire. Home contents insurance is different from buildings insurance (which covers the cost of damage to the structure of your property). If you live in a rented property your landlord should have paid for the buildings insurance. However, the landlord is unlikely to have insured your possessions in their property. Your landlord or letting agent may require you have home contents insurance, as part of your tenancy agreement.
If you would like further information, you might find the links below useful: