Save Like The Young Ones

Saving for a rainy day is what lets you buy an umbrella to keep you dry until the rain passes. Alternatively you may be saving with a specific goal in mind, for example to buy a house. Like many aspects of life, your saving needs and habits may change as time goes by.

If you are on the younger side, you may be looking at paying for your wedding, putting together a deposit on a house or planning for the costs of having children. If you are on the older side, then you may already have passed the bulk of life’s financial milestones. Instead you may be looking at saving for your personal goals. Alternatively you may be saving to help your children.

Whatever your age, the guiding principle should be to save money but enjoy life. You should also look at the most efficient and appropriate ways to save.

Treat savings as a key part of the family finances

In addition to day-to-day purchases, such as grocery shopping and utility bills, there are also recurring and foreseeable expenses which need to be managed. For example insurance policies may need to be renewed and household items, such as washing machines, may need to be replaced.

In very simple terms you will either need to have the money to pay for these or you will need to use credit.

It is also advisable to think about potential emergencies or challenges and how you would cope with them. For example having cash savings may form part of a plan for dealing with a period out of paid employment.

Do you really want to keep all your eggs in one basket?

As well as thinking about how much you need to save, it can be helpful to think about where to keep your savings. Here are some ideas.

Physical cash

Although keeping cash in the house (or elsewhere) means that you are missing out on the opportunity to earn interest, it can be convenient to keep some of your savings in physical form. If you need to use cash, but don’t want to, or can’t, go out, then having a stash of cash close to you can be very useful. Likewise if you live in a place where there is a limited number of ATMs, it may be useful to have a Plan B. Obviously storing physical cash has security implications. You will need to think about the pros and cons of this option for yourself.

Instant-Access Savings Accounts

These come in various forms such as standard savings accounts and individual savings accounts (ISAs). While the money is available to withdraw at any time, you will need to ensure that you understand how you go about accessing it. If you feel it is reasonably likely that you will need to withdraw more than the £250 available at ATMs, then you will need to check that there is somewhere accessible where you can pick up your cash, e.g. a local bank branch or Post Office.

Non-Instant-Access Savings Accounts

Some savings vehicles require a notice period before cash can be withdrawn. The reward for this may be better interest rates. Again, you will have to weigh up the reduced convenience against the potential gains.

Alternative Savings Vehicles

Premium bonds do not offer interest, but they do keep their cash value and can be redeemed at any time. Plus there’s always the possibility that you’ll win, somebody has to.

You might also wish to look at putting some of your savings into peer-to-peer lending. Unlike the previous options, there is always a risk of losing capital in this situation. On the other hand, there is the potential of attractive interest rates.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN.

YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED