How to save How to save for the future
Which? Archive
This article, How to save, was last updated on 10 March 2010 and is now out of date and held in our online archive for reference. Explore our latest Money articles.
How to save: getting started
Save money in a Best Buy cash Isa for a risk-free investment
It's a good idea to pay off your debts before you start saving.
How much to save
Start with a target of how much you want to save and put aside an amount each week/month, whatever you can spare. When you see the pot fill up, the psychological boost should keep you committed to keeping it up. At the minimum, try to save three months’ salary that you can access immediately.
After that, you could switch to other investments such as fixed rate bonds, but be aware that these can lock your money up for several years.
Isas
If you can afford it, save a little bit of money in a cash Isa, as these are risk free and entitle you to claim all of the interest they attract instead of a percentage going to the inland revenue.
You’re currently allowed to save £3,600 per tax year in your cash Isa (£5,100 if you're over 50) or £7,200 (£10,200 if you're over 50) in the higher risk stocks and shares Isa. These limits rise to £5,100 cash Isa allowance and £10,200 stocks and shares Isa allowance from 6 April 2010. See our Best Rate Isas for the best rates, and check out the Which? for more information.
Move your Isa to a better provider if the one you have no longer looks as perky as it did when you first invested. Not all providers accept transfers or give their top rates to transfers, so shop around.
Spread your savings
Higher interest accounts
One of the golden rules of investing is to spread the risk, so as well as your Isa, invest your money in higher interest accounts. However, make sure you check the terms and conditions on these, as they're not always as good a bet as they first seem.
For example, higher interest accounts might limit the amount you can invest to £200 per month or the headline rate might drop after a couple of months, so read the small print. See the Which? reviews of current accounts and savings accounts for current Best Buys.
If a bank goes bust...
The collapse of Northern Rock and Icesave has hammered home the message not to have more money in a single deposit account than can be met by the financial services compensation scheme, if the bank goes bust.
For deposits in banks, this scheme currently has an upper limit of £50,000, though there are much smaller amounts if the claim involves firms who were declared in default before that date.
Other low-risk savings
Other low-risk saving options are bonds, but remember your money isn’t always as accessible if you need it in a hurry and the returns aren’t often great.
Or you could invest in National Savings premium bonds, where any winnings are tax free and your original investment isn’t at risk from anything other than inflation.
