It is a good idea for you to have a goal in mind when you decide to start saving. This could be long-term saving for university or retirement, or it could be short-term for a holiday or a car. Either way, having a plan set in place is a good idea.
A good way to start off is to work out how much you can afford to save each month and start by looking at what you are already spending. You can then begin to look at ways to cut down your budget and spend less. Take a look at Nationwide’s tips in their guide on how to manage your money.
The type of savings account you choose will depend on your goals. The longer you are prepared to save for and put money away, the more interest you can get. But it is worth considering all your options and how much flexibility you need.
If you’re not the type of person that is very good at saving or doesn’t know where to begin then take a look at this guide by the Money Advice Service on getting into a savings habit.
Just before we get into more detail, below are some savings terms explained in a bit more detail for you, so you know exactly what everything means before you start opening your savings account.
Saving terms explained:
- Fixed rate savings accounts– these offer an interest rate that is fixed for a period of time.
- Fixed term savings accounts– these last for a certain period of time, and you can’t withdraw money without a penalty during that period.
- A notice period – this is the length of time you have to wait before you can withdraw money from an account.
- Bonus interest– is extra interest earned if you meet certain conditions, like paying a certain amount each month.
Make a date
To make sure that you are saving regularly, set up a monthly payment into your savings account. Also, when you get paid or get a pension increase, increase the amount you are saving. Keep a note of every payment that you make, then set yourself a budget that covers all the essentials and see how much you have left over; this way you can work out how much to save.
Saving for a short period of time – Instant savings account
An instant savings account can give you a lot of flexibility, allowing you to access your money instantly with no withdrawal penalties – so you can take money out whenever you want to. You can watch your savings grow and your interest is calculated daily and paid monthly into your account.
Consider stocks and shares
For you savers out there who are willing to accept a level of risk you might want to consider investing into some stocks and shares for those higher potential returns. However, you must be prepared to leave your money untouched for at least five to ten years and you should always seek out some professional help and advice before you invest.
Beware of inflation
Few accounts pay a rate that will match, let alone beat inflation. You will definitely need to shop around for a savings account that has a good interest rate. Otherwise the only way you will protect yourself is to invest in some assets, such as buying a home (if you can afford to).
You could choose to lock your money away for a fixed term and then you can benefit from possible higher rates of interest. Fixed term options might offer you bonus rates as an introduction that could boost your savings further.
Here are some more key factors to consider when opening a savings account. Whatever you choose to do, cover all aspects before tying yourself down to one savings account, shop around and don’t be afraid to ask questions at any bank.