The easiest way to get your savings working for you is to set things up so that you automatically add a little bit each month to your savings. That way you won’t have to remember to make the payment and you won’t be tempted to skip a month. Before you know it, you’ll have built up a solid chunk of savings for example, one way of saving tax efficiently is through a Cash ISA.
One of the quickest way to do this is to set up a standing order (a regular payment) from a bank current account into your chosen savings account. See Direct Debits and standing orders.
Even if you’re based abroad, you can open a bank account in that country and nominate an amount to be moved into a savings account either there or back home, if you have an account here.
Watch this video - Why it pays to save regularly - from the Money Advice Service.
Do it on pay day
The best time to put a bit of money aside is just after you’ve been paid, so set up your standing order to go out on or just after pay day.
In October 2015, JoiningForces was launched as a partnership between three leading credit unions, offering Armed Forces personnel access to simple savings and loans through direct deductions from your payroll.
This makes saving even easier, because the money comes straight out of your pay, just like your tax and National Insurance contributions.
Earning interest on interest
As your savings build up, they’ll grow faster– even if you’re only paying in the same regular amount. This is because each time the interest earned on your money is paid into your account it starts earning interest too.
This interest-on-interest is called compound interest, and over the longer term it makes a big difference to how much your savings are worth. See this video from the Money Advice Service to see how compound interest works.
How much can you afford to save?
If you’ve got money left over at the end of each week or month then great - you’ve already got your starting point. You’ll be able to save this amount – and maybe even more.
But even if there’s usually nothing left, it doesn’t mean you can’t save – it’s not easy to change how much money you have coming in but most people can change how much goes out. To get tips on how to cut back and unlock your saving potential see Budgeting to make the most of your money.
What about regular investing?
The UK government defines saving as putting money aside without risk, and usually with the chance to earn interest.
Investing involves committing money into an investment vehicle in the hopes of making a financial gain. Investing is different from saving because it involves a greater level of risk and there is no guarantee that you will get your money back.
You can make regular payments from as little as £25 a month into investment products, such as a Stocks and Shares ISA or Unit Trust Investment Funds.
Investment products are for the longer term and are generally suitable if you already have enough cash savings to keep you going for 3-6 months if needs be - see Saving for emergencies.
Investments generally outperform cash savings over the longer term, but their value can rise and fall, so you have to be prepared to take on some risk.
They may be suitable for people who don’t require easy access to their money and are prepared to take on some risk. Find out more about investments in Investments at a glance.
See Save and invest to find out your options and Cash savings to get you started and MoneyFit