Step 5: Save regularly
It's important to save regularly, even if you can only manage a small amount. For one thing, if you have an emergency fund, or a bit stashed away, you'll be less likely to fall into the debt habit and rely on credit cards or loans. And it will take some pressure off if there’s an unexpected change in your circumstances, such as losing your job. You can save for security, or maybe you have something specific you want, like a new car or a holiday. Having a goal will often make it easier to keep up with regular savings.
Things to consider
- How much can you afford to put away regularly? Even if it's only £5 or £10 a month, it's better than nothing and if you find that easy, over time you can increase the amount.
- Think about whether you will need instant access to the money, or whether you can leave all or some of it. If you can leave it, you may find a better interest rate with an account where you have to give advanced notice if you want to withdraw any of your money.
- Be sure to use your ISA allowance. At the moment, this allows you to invest up to £5,340 in a Cash ISA, £10,680 per year in a Stocks and Shares ISA, or a combination of the two (so long as you don’t exceed £5,340 in a Cash ISA and £10,680 in total).
- Set up a standing order to pay into your savings every month, this way you'll get used to the money going out and won't be tempted to spend, or forget to pay it in.
- Even if you're not saving for a specific purpose, just getting into the habit of saving and thinking before you buy, makes good financial sense. You can set yourself mini targets and give yourself rewards, so it may be that when you reach £1000, you'll treat yourself to a new pair of shoes.
- Shop around - look for the best interest rate. Often you'll get a better rate if you commit to a monthly amount. Check out comparison websites that let you compare accounts.